On June 1, nine industry and trade groups filed a lawsuit in Texas federal court challenging the Department of Labor’s (DOL) fiduciary rule, saying the department overstepped its authority in making the rule and that the new regulations will harm retirement savers. The U.S. Chamber of Commerce, the Securities Industry and Financial Markets Association (SIFMA), the Financial Services Institute and five other national and local business groups filed the lawsuit, seeking an injunction to halt the final rules unveiled in early April that impose a fiduciary duty on financial professionals. The law is set to go into effect on June 6. The industry groups are hoping to get the court to issue an injunction that would prevent the implementation.
The nine groups, led by the U.S. Chamber of Commerce, filed the expected lawsuit in U.S. District Court Northern District of Texas. The 74-page complaint is filed against Labor Secretary Thomas Perez and the DOL. Plaintiffs ask the court to immediate vacate and set aside the rule.
"An injunction would also serve the public interest by averting harm to the operation and viability of financial services companies that are an important part of the U.S. economy," the complaint reads. Plaintiffs outline their general line of attack in the first paragraph, arguing that the department lacks the authority to publish the rule.
The complaint also points out that Congress authorized the SEC as "the primary federal regulator of the financial services industry." The SEC is working on its own fiduciary standard that is expected to be released within the next year.
The DOL propsed the new rule in April 2015, which covers advice provided regarding qualified retirement employer-sponsored plans and individual retirement accounts. DOL officials and public interest groups say the rules, which impose a fiduciary standard of care on financial advisors dealing with retirement accounts, are necessary to protect retirement investors from high commissions. Critics say the DOL is trying to force the industry to move from a commission- to a fee-based model. The rule allows for commissions via a prohibited transaction exemption, but industry officials said it isn’t realistic due to the burdensome regulations.
The U.S. Chamber of Commerce, Financial Services Institute, Financial Services Roundtable, Greater Irving-Las Colinas’ Chamber of Commerce, Insured Retirement Institute, Lake Houston Area Chamber of Commerce, Lubbock Chamber of Commerce, SIFMA, and Texas Association of Business are the co-plaintiffs in the legal challenge.
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