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The Labor Department’s fiduciary rule survived yet another legal challenge when a federal judge in Kansas upheld the rule on its merits after previously refusing to block the rule’s enforcement ( Mkt. Synergy Grp., Inc. v. DOL , D. Kan., No. 5:16-cv-04083-DDC-KGS, 2/17/17 ).
This Feb. 17 decision marks the third time a federal judge has upheld the rule—which is aimed at reducing the allegedly conflicted investment advice given to retirement savers—from lawsuits brought by players in the financial industry. Despite these victories, the rule faces an uncertain future: President Donald Trump on Feb. 3 signed a memorandum ordering the Labor Department to rethink the rule.
The department on Feb. 9 took a step to delay the rule’s April 10 applicability date by filing a proposal with the Office of Management of Budget. The OMB hasn’t yet cleared the DOL’s proposal for public review.
Several groups have already met with the DOL over the proposal, including the Financial Planning Coalition, Betterment, the Committee for the Fiduciary Standard, the AFL-CIO and the Public Investors Arbitration Bar Association.
AARP, Better Markets and Siegel Public Affairs are scheduled to have meetings with the DOL this week.
In affirming the DOL’s process for adopting the fiduciary rule, Judge Daniel D. Crabtree said he saw no reason to depart from his November 2016 decision denying Market Synergy Group’s attempt to block the rule’s enforcement. Crabtree’s decision briefly mentioned the presidential memorandum calling the rule’s future into question, but the judge didn’t comment on how this development affected the pending lawsuit.
In his November decision, Crabtree upheld the adequacy of the DOL’s rulemaking process and, in particular, the notice given by the department that it might regulate investment products called fixed indexed annuities more aggressively than more traditional products such as fixed rate annuities.
In addition to Crabtree, federal judges in Texas and Washington, D.C., have upheld the rule and its regulatory process from a wide array of legal attacks. A final challenge is pending in a Minnesota federal court, which was recently asked by the DOL to put the case on hold while the department considers how to respond to Trump’s memorandum ordering reconsideration of the rule.
Market Synergy Group was represented by Carlton Fields Jorden Burt PA and Walters Bender Strohbehn & Vaughan PC. The Department of Justice represented the DOL.
To contact the reporter on this story: Jacklyn Wille in Washington at firstname.lastname@example.org
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Text of the decision is at http://www.bloomberglaw.com/public/document/Mkt_Synergy_Grp_Inc_v_DOL_No_16CV4083DDCKGS_2017_BL_49586_D_Kan_F.
Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.
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