Several organizations have joined together to file a legal challenge to the Department of Labor’s conflict of interest rule, alleging that DOL overstepped its authority in crafting a uniform fiduciary standard of care for brokers and registered investment advisors.
Chief executive officers of the five national association co-plaintiffs participated this morning in a media conference to discuss the multiparty lawsuit. Nine organizations in all filed on June 1st a legal challenge to the Department of Labor’s fiduciary rule for brokers and registered investment advisers serving Americans with individual retirement accounts (IRAs) and 401(k) plans.
The 9 organizations joining in the suit include:
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
Securities Industry and Financial Markets Association;and
The Texas Association of Business
“Our organizations have a long, well-documented record of support for the creation of a uniform best interest — or fiduciary — standard of customer care for financial professionals providing personalized investment advice to retail investors,” chief executive officers of the 5 national associations note in a joint statement released in advance of a teleconference with journalists to discuss the lawsuit.
“The Department of Labor’s new, 1,023-page rule, however, creates sweeping changes to existing regulations that will make saving for retirement more difficult for the very same hardworking American families and individuals it claims to protect, the statement adds. “It specifically hinders many of our member firms’ ability to continue providing the level of holistic financial advice and suitable investment options their clients are accustomed to.”
The plaintiffs argue also the rule will restrict consumers’ access to affordable retirement advice and limit their options for saving. They contend the rule will impose financial advisors with extensive new requirements and constant liability, forcing them to limit the options and guidance they provide to retirement savers.
“The reason we are bringing this legal challenge is to protect those smaller investors who will be harmed by this rule — pushing a dignified retirement even farther out of reach,” said Dale Brown, president and chief executive officer of the Financial Services Institute (FSI). “The bottom line is, the Financial Services Institute, like others around this table, has supported a uniform fiduciary standard since 2009 — before Dodd-Frank became law.
“Being ‘pro-fiduciary’ is not something new to us or our members,” he added. “But the Department of Labor’s complex and unworkable rule will only harm the smaller investors it claims to protect. Contrary to what supporters of the rule will claim, this legal challenge is solely about ensuring the rules governing retirement advice work for all retirement investors. This rule does not pass that test.”
The various organizations are now asking a court to review whether the DOL overstepped its boundaries, creating a rule that will leave Americans with fewer retirement choices, higher costs and reduced access to professional financial advice. The organizations also are alleging that the ‘private right of action’ mechanism creates significant new legal risk for financial advisors, who will face the threat of class action lawyers challenging their every move.
They argue, too, that advisors servicing small business plans will have to limit or stop servicing the retirement plans offered by small businesses, reducing the retirement savings options available to employees. These consequences collectively reinforce that government officials failed to perform an adequate cost-benefit analysis during the rule’s development.
“As we have said since day one, there is no compelling evidence this rule is necessary to achieve a uniform fiduciary standard, and DOL’s own analysis fails to make the case,” said Brown. “Today our efforts to protect every American’s right to properly plan for a dignified retirement takes the next necessary step.”
“This lawsuit is necessary to prevent the Labor Department from exceeding the authority that was assigned to it by Congress,” he added. “More importantly, it will protect retirement savers and our member firms, who are committed to their financial futures.”
You’re invited to join us on Facebook.