Fiduciary Rule Violates First Amendment, Law Firm Argues

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By Jacklyn Wille

The Department of Labor’s fiduciary rule violates the First Amendment by restricting the truthful, commercial speech of financial advisers, the Washington Legal Foundation told a federal appeals court ( Chamber of Commerce v. U.S. Dep’t of Labor , 5th Cir., No. 17-10238, amicus brief filed 5/9/17 ).

The nonprofit law firm is urging the U.S. Court of Appeals for the Fifth Circuit to revive a First Amendment challenge to the DOL’s fiduciary rule, an Obama-era regulation aimed at reducing the allegedly conflicted investment advice given to retirement savers. In February, a federal judge dismissed the First Amendment claims brought by the Chamber of Commerce and others, explaining that the groups waived this claim by failing to raise it during the DOL’s rulemaking process.

The fiduciary rule was scheduled to become applicable on April 10, but the DOL recently pushed that date back to June 9 in response to a memorandum from President Donald Trump ordering a re-evaluation of the rule. Multiple industry groups and companies have filed lawsuits challenging the fiduciary rule from a variety of angles. Every federal judge who has ruled on these cases upheld the rule in its entirety, handing losses to the Chamber and the American Council of Life Insurers, Market Synergy Group and the National Association for Fixed Annuities.

In its friend-of-the-court brief, Washington Legal Foundation said that the federal judge who heard the Chamber’s lawsuit misapplied the law with respect to waiver of claims. The judge’s “unduly harsh approach"—which found the First Amendment claim waived for litigation purposes because it wasn’t raised during the regulatory process—contravened U.S. Supreme Court precedent and “considerations of basic fairness,” the firm said.

Moreover, the fiduciary rule should be subject to heightened judicial scrutiny because it discriminates against speech based on the content and identity of the speaker, the firm said.

The May 9 brief was submitted by Cory L. Andrews and Mark S. Chenoweth of the Washington Legal Foundation.

Thrivent Financial for Lutherans, a fraternal benefit society that is mounting its own challenge to the fiduciary rule, also filed a brief on May 9. The brief takes aim at how the fiduciary rule makes it difficult for financial institutions to use class action waivers, which Thrivent says violates the Federal Arbitration Act.

To contact the reporter on this story: Jacklyn Wille in Washington at jwille@bna.com

To contact the editor responsible for this story: Jo-el J. Meyer at jmeyer@bna.com

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