WASHINGTON — Three consumer groups are asking a D.C. federal court to deny a trade group’s request for an injunction that would bar the Department of Labor (DOL) from implementing its fiduciary standard rule next April, pending further legal proceedings.
The friend of the court brief was filed by Better Markets, Inc., Consumer Federation of America, and Americans for Financial Reform. It challenges a lawsuit seeking the injunction filed June 2 by the National Association for Fixed Annuities (NAFA).
See also: NAFA plots course in DOL rule fight
At its core, the brief argues that the public interest is best served by denying the requested injunction “both because of the terrible toll exacted on savers from conflicted advice and because the industry’s own public comments belie their hyperbolic claims of imminent harm.”
The first court hearing will be held Thursday, Aug. 25.
At the core of NAFA’s complaint is that the DOL inappropriately decided to include fixed indexed annuities (FIAs) under the Best Interest Contract Exemption (BICE) in the final rule, rather than under the less onerous PTE 84-24 as originally proposed.
The suit argues that the DOL did this “with no opportunity for meaningful comment and without adequate justification,” that as a result, inclusion of FIAs under the rule was arbitrary and capricious.
“As fixed insurance products and not securities, FIAs and those who create, distribute and sell them stand to be uniquely harmed by this rule,” the suit contends.
In general, NAFA contends in its lawsuit, the DOL rule is invalid on grounds that the agency exceeded its authority to regulate IRAs and because it improperly categorizes insurance agents as fiduciaries. Moreover, the lawsuit alleges, “the rule creates a private right of action, which only Congress can do,” by allowing consumers to file lawsuits if they feel they are harmed by the performance of a financial product sold into their investment account.
In their brief, Better Markets, CFA, and AFR take particular aim at a claim in the NAFA lawsuit that the DOL did not conduct an adequate cost-benefit analysis in justifying the rule.
It is a recent trend for businesses seeking to throw out a federal rule to argue that crafters of the rule did not conduct an adequate study of the potential cost of the rule before implementing it.