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Overview of the 5 Recent Lawsuits Filed Against the DOL Fiduciary Regulation

  • June 13, 2016

Philippe PlagemanWe can all be forgiven if we have lost track of legal action around the DOL’s fiduciary regulation.

As of Monday, June 13th, a total of five lawsuits have now been filed challenging the Department of Labor’s fiduciary regulation. Below is a table giving a snapshot of these initiatives.

Overview of Legal Actions Against the DOL Fiduciary Regulation – as of June 13, 2016

Date of Suit Main Plaintiffs Focus of Complaints Venue
June 1 USCC, SIFMA, and 7 other organizations Broad, with attack on DOL’s lack of authority in regulating IRAs US District Court, N. Texas
June 2 National Assoc. for Fixed Annuities Relief for sales of Fixed Index Annuities & attack on DOL’s lack of authority in regulating IRAs US District Court, D.C.
June 8 ACLI & NAIFA Relief for sales of Variable Annuities US District Court, N. Texas
June 9 Indexed Annuity Leadership Council Relief for sales of Fixed Index Annuities US District Court, N. Texas
June 9 Market Synergy Relief for sales of Fixed Index Annuities US District Court, Kansas

Fallout and Thoughts…

  • What kind of organizations are suing and why? – Aside from the first lawsuit, the plaintiffs represent insurance product manufacturers, primarily of fixed index annuities and variable annuity products. These products were added to the prohibited transactions list in the regulation and thus require a Best Interest Contract Exemption (BICE) to be sold.
    • In the first suit, the United States Chamber of Commerce (USCC) and SIFMA are suing, arguably, to protect broker-dealers and commission-based compensation, which would likely be drastically reduced as a form of compensation were the regulation to be enforced as written.
  • Still preparing for the regulation – Firms are still preparing for the rule by working on all operational and sales implications while keeping watch of the lawsuits.
  • Likelihood of an injunction – According to some industry observers, it is very possible for an injunction to be issued, especially in North Texas District Court, while the judicial process takes place.
  • How far will the suits go? – The issue, if not all the lawsuits, is likely to go all the way to the Supreme Court.
  • Why North Texas District Court? – This court is known to have a conservative bent and has issued an injunction of a DOL regulation before.
  • DOL Reaction – Secretary Perez has vigorously defended the regulation, not surprisingly, and took a combative tone.
  • Presidential action – On Wednesday, June 8th, President Obama vetoed a Congressional resolution to block the fiduciary regulation.
  • Are more lawsuits in the offing? – There are no rumors of additional legal action, but stay tuned…
  • The next act – As of this writing, the first scheduled hearing for any of the suits is August 25th, when the U.S. District Court for the District of Columbia will hear the lawsuit filed by the National Association for Fixed Annuities. It is unknown when other suits will be heard.
  • HOW TO KEEP UP WITH EVENTS – Investment News has a nice “go to” site dedicated to tracking news related to the regulation, including ways to comply with the regulation. And we will do our best to track and post notices.

Please share with us any thoughts or questions you have.

Philippe Plageman
Director of Market Research and Product Management
Fluent Technologies
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