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Court Overturns Revised DOL Fiduciary Rule

The U.S. Court of Appeals for the Fifth Circuit in New Orleans ruled 2-1 on March 15 to vacate the revised fiduciary rule, issued in April 2016, which requires investment brokers and others to put clients’ interests ahead of their own when giving retirement or other financial advice...
March 20, 2018

The U.S. Court of Appeals for the Fifth Circuit in New Orleans ruled 2-1 on March 15 to vacate the revised fiduciary rule, issued in April 2016, which requires investment brokers and others to put clients’ interests ahead of their own when giving retirement or other financial advice. The court noted in its ruling [Chamber of Commerce of the United States of America v. U.S. Department of Labor] that the Trump administration has directed the Labor Department to re-examine the rule and prepare an updated analysis of its provisions, some of which don’t become effective until July 2019.

“The DOL fiduciary rules may make professional advice too expensive for millions of households and small businesses,” said PIA National Counsel and Director of Regulatory Affairs Lauren Pachman, Esq. “In addition, the increased liability exposure for insurance agents would subject agents to a confusing array of regulatory frameworks depending on what specific service was being provided. The rule would also increase the cost of services, causing some agents to exit the market entirely or discontinue services for smaller accounts.”

The DOL has yet to comment on its next steps. It may appeal the decision, or accept the court ruling and focus on its own review of the revised fiduciary rule, which has been ongoing since last year. Additionally, the Securities and Exchange Commission (SEC) is also considering promulgating its own “fiduciary rule,” an action that appears more likely in the wake of the Fifth Circuit’s decision.