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Insurance Industry Files Suit to Block DOL Fiduciary Rule Implementation

Insurance Industry Files Suit to Block DOL Fiduciary Rule Implementation

Cry me a river. The insurance industry doesn’t want the new Department of Labor (DOL) fiduciary rule because they would actually have to put the clients’ interest ahead of their own when making recommendations. Sad that the DOL and other consumer advocates had to push for a rule requiring the financial services industry to behave in a manner that seems so obvious. Now they are suing to stop the fiduciary rule implementation. No shame.

Here is an excert from a recent article on the subject:

 During the first hearing, the industry trade group, National Association for Fixed Annuities (NAFA) lawyer said DOL rule ‘embodies’ overreach to do things Congress never intended. Lawyers representing NAFA told a U.S. District judge Thursday that individual insurance agents would be forced to become registered investment advisors under the Department of Labor’s fiduciary rule and that the current distribution system for fixed indexed annuities would have to be reworked.

Judge Randolph Moss, U.S. District judge for the District of Columbia, heard oral arguments for close to three hours Thursday in the first hearing against DOL’s rule, but did not immediately render a decision.

Philip Bartz, a partner at Bryan Cave and a former U.S. Justice Department lawyer, said during his arguments that DOL’s rule embodies “overreach” by DOL to “do things that Congress never intended” and that it’s “at odds” with state insurance law.

Bartz argued that the Employee Retirement Income Security Act would now pre-empt state law under the rule and that the rule improperly created a private right of action that could set up class-action lawsuits against insurance companies and agents. “They are going to have their butts sued off he said”

The rule would cause “extraordinary” harm to the $50 billion industry, Bartz said, noting that 60% of fixed indexed annuity sales go through individual insurance agents. The DOL disagreed with the assertion that the rule creates a new private right to sue, “arguing that the applicable cause of action is breach of contract, which already exists under state law,” said Erin Sweeney, counsel at Miller & Chevalier, who has also served as senior benefit law specialist at DOL.

Under the Employee Retirement Income Security Act, a fiduciary investment advisor is defined as one who “renders investment advice for a fee or other compensation.” “NAFA contended the DOL exceeded its authority because neither the statute nor its legislative history indicates that Congress meant to conflate ‘advice’ with ‘sales,’” Sweeney said.

NAFA argued in its brief that “as has been recognized forever until now, the investor who buys the annuity is paying for a product, not investment advice, and the salesperson is not a fiduciary,” Sweeney added.   

If you have been harmed by the recommended sale of a fixed, indexed or variable annuity, contact the securities litigation attorney at Colling Gilbert Wright for a free case evaluation. There is no fee unless we are succesful in obtaining you compensation for your losses.