FPA, CFP Board throw support behind DoL in fiduciary lawsuits
The Department of Labor, fighting off industry attacks on its fiduciary rule in three cases, isn't alone in its struggle to move the industry to a stricter standard of care.
The department got a boost this week from the CFP Board, FPA and other organizations, which filed legal briefs in support of the regulation.
The moves come as oral arguments were heard in one of the cases on Thursday, the same day that Secretary of Labor Thomas Perez defended the rule while also rolling out new regulations to facilitate state-run retirement plans. He cited the department's lengthy rule-making process and existing regulatory authority under ERISA, a 1974 law empowering the Labor Department to oversee retirement accounts.
"This is all reflecting the fact that the retirement landscape has changed tremendously, and the legal landscape has to catch up," Perez said during a conference call. "The folks who are suing, the status quo has really worked for well them."
The department has faced fierce industry opposition to its fiduciary rule. Critics have said the rule imposes too onerous a burden on firms and that the Labor Department lacks the authority to craft the rule — a point that the Labor Department has repeatedly rejected.
On Thursday, the Financial Planning Coalition — which includes the board, FPA and NAPFA — filed an amicus brief in a Texas federal court opposing efforts to overturn the fiduciary rule. Groups opposing the DoL in that case include SIFMA, FSI and the U.S. Chamber of Commerce.
The coalition argued in its brief that current regulations fail "to align advisers' interests with investors' by leaving open significant loopholes that allow for the sale of financial products that may not be in the best interests of the investor. The department's strengthened fiduciary rule is therefore necessary and appropriate to protect the public."
The coalition says the experience of its nearly 80,000 financial planning professionals "provides the court with a unique perspective on the issues in this case."
The plaintiffs in the Texas case argue that the department lacks the authority to craft such "sweeping changes." Citing their support of the SEC promulgating its own standard, the trade groups say the department's "rulemaking, however, would undermine Congress’s goal of a uniform best interest standard and would harm the retirement savers DoL purports to help."
Meanwhile, the National Association for Fixed Annuities sought a preliminary injunction against the fiduciary rule in a District of Columbia federal court, arguing it would cause irreparable harm to its members, according to people with knowledge of the case.
The organization said it would not have any official comment on its oral arguments at this time.
Legal experts say the move is part of a strategy meant to prevent a law from being finalized. It asks the court to consider the harm in allowing compliance preparations to continue if the law is likely to be struck down.
Any decision would be made fairly quickly whether to grant the organization the injunction, though they are rarely granted. Investor advocacy groups such as PIABA have filed amicus briefs supporting the Labor Department.
The outcome of the Washington case, though, will not have a bearing on the case that will be heard Nov. 17th in Texas.
"We are confident in our positions and look forward to making our case before Judge Lynn," Ira Hammerman, general counsel for SIFMA, says.