The motion asks for a delay of 10 months at a minimum but says a two-year delay is warranted.
The association is appealing an order and memorandum opinion of the federal district court issued Nov. 4 denying NAFA’s application for a preliminary injunction and motion for summary judgement in its lawsuit against the U.S. Department of Labor’s fiduciary rule, and a subsequent district court order issued Nov. 23 denying NAFA’s motion for an injunction pending appeal.
“We are aggressively moving forward with our appeal of the lower court’s decision, but our immediate concern is to stay the rule’s implementation date set for April 10, 2017,” said Chip Anderson, NAFA’s executive director, in a press release. “With every passing day, NAFA members are incurring excessive and unrecoverable expenses as they attempt to navigate the rule’s byzantine compliance regime. Moreover, we are extremely concerned about how quickly consumers may face an environment in which they no longer have access to the products and professional advice needed to retire with confidence.”
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.
“Without this injunction, even if NAFA ultimately prevails on the merits of the case, a win on appeal will only be a Pyrrhic victory,” said Anderson. “The DOL’s dangerous overreach and creation of such an unworkable regulatory landscape poses a glaring and immediate threat to NAFA membership and those it serves as they struggle to address a sea of unknowns and the potential for an environment fraught with private action.”
Anderson pointed to record sales of fixed and fixed indexed annuities as evidence that the products are a worthwhile tool for consumers worried about outliving their assets. He said the “onerous regulation” could upend a well-regulated marketplace and jeopardize the future of American retirement.
Meanwhile, the industry was dealt another blow earlier this week when a federal judge in Kansas denied an attempt by Kansas-based Market Synergy Group to block the rule from being enforced. The judge said Market Synergy Group was unlikely to successfully prove that the Labor Department used improper processes when designing the rule.
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