SIFMA, FSI and allies seek to block rehearing of DoL fiduciary rule
A coalition of powerful financial services trade groups is seeking to block a federal court from reconsidering the Department of Labor's fiduciary rule, asking the court to make its March ruling vacating the ruling the last word on the matter.
In a motion filed on Monday, FSI, SIFMA, the U.S. Chamber of Commerce and other allied groups are asking the 5th U.S. Circuit Court of Appeals to reject filings from the AARP and three states seeking a rehearing on the matter.
The trade groups contend that the AARP and the states lack standing in the case, and argue that their "improper, last-minute motions do not come close to justifying their unprecedented bid to intervene for purposes of filing a motion for rehearing."
The filing marks the latest twist in the unfolding drama surrounding the DoL rule, which groups like FSI and the Insured Retirement Institute have staunchly opposed.
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When the 5th Circuit issued its ruling, many observers were struck by the broad rebuke, raising the question of whether the DoL would mount a defense of the rule to preserve, if not the regulation itself, at least the department's larger rulemaking authority.
The DoL had an April 30 deadline to file a response to the court's 2-1 decision to vacate the fiduciary rule. Now that that deadline has come and gone with no action from the DoL, the rule would be struck down on May 7. The AARP and the attorneys general of California, New York and Oregon are asking the full panel of judges from the 5th Circuit Court to rehear the issue in what is known as an en banc proceeding.
A spokesman for the Labor Department referred an inquiry to the Justice Department. DoJ spokeswoman Kerri Kupec declined to comment on the government's defense of the rule.
"AARP will be filing a reply or a response shortly," says David Nathan, a spokesman for the retirement group.
In a statement last week announcing the AARP's filing, Nancy LeaMond, the group's chief advocacy and engagement officer, pledged that "AARP is not giving up on our fight to make sure that hard-earned retirement savings have strong protections from conflicts and hidden fees."
The AARP said it was attempting to intervene in the case in anticipation that the DoL "itself might not request a rehearing" to save a rule that the retirement group says is an essential investor protection.
"Many financial advisors already give advice with the public's best interests in mind," LeaMond said. "But the recent court decision allows some financial advisors to provide guidance based on what's best for their pocketbooks, not the consumers."
The trade groups noted that the court is not favorably disposed to en banc requests, and also argued that the SEC's recent proposal of new regulations on standards of conduct for brokers and advisors could supersede the DoL's rule.
"[I]f anything, the 1% rate at which the 5th Circuit rehears en banc appeals decided on the merits strongly suggests that rehearing (much less success on rehearing) is unlikely," the groups said in their filing. "The SEC, not the Labor Department, is the appropriate regulatory authority in this area, as this court's decision suggested."
The odds don't get much better on an appeal to the U.S. Supreme Court, which only agrees to consider a miniscule portion of the cases it receives.
"Either way, it's a long shot," says Duane Thompson, senior policy analyst at the fiduciary training firm Fi360.