Multiparty lawsuit alleges DOL overstepped authority with rule

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 

See also: 14 questions (and answers) about the DOL fiduciary rule

“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.”