The battle over the Labor Department’s contentious fiduciary rule intensifies.
On Friday, Wall Street trade groups Sifma and the Financial Services Institute joined as plaintiffs in a lawsuit to overturn the rule in a federal court in Texas, one of two venues in the state challenging the regulation.
Earlier this week, the Certified Financial Planner Board of Standards joined the fight to preserve the fiduciary rule, filing a brief in support of the regulation in the other Texas lawsuit.
The DOL rule, parts of which will take effect on Sept. 23, imposes fiduciary obligations on advisors working with retirement plans and retail clients, including those making one-time recommendations about rolling over a 401(k) account.
Groups representing the insurance industry oppose the rule, arguing that existing regulations provide sufficient consumer protections and warning that the compliance burden would drive many advisors away from working with lower-income retirement savers.
Opponents also contend that the Labor Department exceeded its authority in writing the rule, predicting that it will be struck down in court, just as a similar regulation drafted under the Obama administration was.
Now, those critics are testing their legal theory. In May, a coalition of groups and individuals affiliated with the insurance industry sued to overturn the rule in federal court in Texas’ Eastern District. Later that month, another group of insurance organizations filed a separate lawsuit targeting the rule in Texas’ Northern District. Appeals from both courts are heard by the same circuit court that ultimately struck down the Obama-era rule.
Sifma and the FSI joined the lawsuit in the Northern District, arguing that the current rule is “materially indistinguishable” from the earlier one that the Fifth Circuit Court of Appeals found problematic.
“[L]ike the 2016 rule, the 2024 rule is inconsistent with the common law, contravenes the statutory text, and impermissibly attempts to regulate the provision of services to accounts over which the Labor Department has no regulatory authority,” the groups state. “Indeed, the illegality of the 2024 Rule is even clearer today.”
The CFP Board filed its amicus curiae brief supporting the DOL rule in the case in the Eastern District, stating that the new rule is a crucial investor protection because the previous regulatory regime had “enormous gaps that leave Americans exposed to conflicted advice.”
“The stakes are high,” the board says in a statement. “Tens of billions of dollars are being taken from the American public by financial advice that is in the best interest of the advisor, not the investor.”
On the opposing side, the U.S. Chamber of Commerce has filed amicus briefs in both cases asking the courts to strike down the rule.
