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On March 15 the U.S. Court of Appeals for the Fifth Circuit vacated the Department of Labor’s Fiduciary Rule in a 2-1 decision. The Court agreed with several of the plaintiffs’ objections to the rule, including: its inconsistency with existing rules, the DOL’s overstepping its boundaries and its imposition of legally unauthorized contract terms to enforce the rule. The full text of the ruling can be read here.

The court decision says, the “DOL has no such statutory warrant, but far from confining the Fiduciary Rule to IRA investors’ transactions, DOL’s regulations affect dramatic industry-wide changes because it’s impractical to separate IRA transactions from non-IRA securities advice and brokerage. The court further stated, the “DOL has made no secret of its intent to transform the trillion-dollar market for IRA investments, annuities and insurance products, and to regulate in a new way the thousands of people and organizations working in that market.”
In partnership with our coalition partners, including the U.S. Chamber of Commerce, FSI and SIFMA, the IPA consistently advocated against the DOL rule, including support of a delay of full implementation of the DOL fiduciary rule until July 1, 2019.
The DOL now has the option to accept the ruling, seek a rehearing before the full appeals court, or appeal to the U.S. Supreme Court. By about May 7, absent a challenge to the ruling, we expect the court’s decision to take effect.
Regarding SEC jurisdiction, the Fifth Circuit further stated “Rather than infringing on SEC turf, DOL ought to have deferred to Congress’s very specific Dodd-Frank delegations and conferred with and supported SEC practices to assist IRA and all other individual investors.”
It remains to be seen whether the SEC will propose its own standard of conduct this year, and how this decision may affect potential rulemaking. You can read the IPA’s comment letter to the SEC here.

Join us at the IPASummit 2018 on April 18, 2018 in Washington, DC to hear directly from SEC Commissioner Michael S. Piwowar regarding the SEC’s current regulatory agenda and what to expect from the Commission’s fiduciary rule proposal. Then we will take our message directly to Capitol Hill and ask Congress to support a workable best interest standard from the SEC.
Best regards,
Tony Chereso
President & CEO
Investment Program Association