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.
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 & Carter for a free case evaluation. There is no fee unless we are succesful in obtaining you compensation for your losses.