The National Association for Fixed Annuities said Monday it plans to appeal a judge’s decision upholding the U.S. Department of Labor’s fiduciary rule.
The appeal will go to the D.C. Circuit Court of Appeals.
“We are obviously disappointed by the court’s decision, but we have always assumed this case would get decided by a higher court and we are pleased the issues will get de novo review by the Circuit Court,” said Chip Anderson, executive director of NAFA. De novo review means the appellate court will consider the case without being bound or influenced by the lower court’s decision.
NAFA filed its lawsuit in June seeking a preliminary injunction to stay implementation of the rule. Judge Randall Moss, who presided over the case, denied the preliminary injunction and ruled in favor of the Labor Department on its merits in upholding the rule.
Among other things, NAFA claimed the Labor Department violated the Administrative Procedure Act when it shifted the regulation of fixed indexed annuities to the rule’s Best Interest Contract Exemption. In the proposed version of the rule, fixed indexed annuities were scheduled for regulation under the less restrictive Prohibited Transaction Exemption 84-24.
In shifting fixed indexed annuities to the Best Interest Contract exemption in the final rule, NAFA argued the industry was not given adequate notice to comment on the implications, as the Administrative Procedure Act requires.
But Moss cited case law showing that a final rule “need not be the one proposed” in the rulemaking process.
“It is enough that the final rule constitute a logical outgrowth” of the proposed version, wrote Moss.
Moss reasoned that NAFA was given adequate notice that the department was considering regulating fixed indexed annuities under the Best Interest Contract exemption when it explicitly sought comments on whether annuities were adequately regulated in the proposal.