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July 11 — The Labor Department filed its first formal response to lawsuits challenging its newly finalized fiduciary rule, which raises the standards governing those who provide investment advice to retirement savers ( Nat'l Ass'n for Fixed Annuities v. Perez , D.D.C., No. 1:16-cv-01035-RDM, opposition to motion and cross-motion for summary judgment filed 7/8/16 ).
In July 8 court filings, the department disputed the accusation that it botched the rulemaking process, saying that it “acted well within its authority” and “provided a reasoned explanation for its decision.” The department contended that its new interpretation of “investment advice”—which industry groups blasted as overbroad and contrary to law—was entitled to deference and should be respected by the federal courts.
The department faces five separate lawsuits over the fiduciary rule. Three of the suits are pending in a consolidated action in Texas and a hearing in those cases is scheduled for Nov. 17.
Another lawsuit is pending in a Kansas federal court, which scheduled a hearing for Aug. 24.
The department's 105-page defense of the fiduciary rule was filed in the U.S. District Court for the District of Columbia. A hearing in that court is scheduled for Aug. 25.
Much of the department's argument centered on the idea that the rule was entitled to judicial deference under the Chevron doctrine, which counsels that federal courts shouldn't disturb agency decisions if certain conditions are met.
The department argued that its broadened interpretation of “investment advice” was necessary in light of “changes in the marketplace for retirement advice” over the last 40 years, in which self-directed retirement plans like 401(k)s have largely replaced professionally managed defined benefit pension plans.
The department also shot back at critics who objected to the rule's creation of a private right of action that would allow individual investors to sue financial institutions over investment advice. According to the department, the only lawsuits that can be brought under the fiduciary rule are those based on pre-existing rights of action under state law.
Finally, the department mounted a broad defense to criticisms of its rulemaking process, saying that it received and considered more than 3,000 comment letters on its proposed rule, held two-day public hearings and conducted more than three dozen meetings with interested parties.
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Text of the department's motion is at http://www.bloomberglaw.com/public/document/NATIONAL_ASSOCIATION_FOR_FIXED_ANNUITIES_v_UNITED_STATES_DEPARTME/2.
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