INFRONT
Lawsuits, Rules And Money As the Department of Labor continues its work on rules extending fiduciary-like duties, some groups are not waiting. Two lawsuits filed in February may or may not have an impact on the outcome.
I
By John Hilton
t has long been assumed that when the Department of Labor tried again to expand a fiduciary standard to common life insurance and annuity sales, a lawsuit would follow. After all, the courts have been very friendly to industry through the years. Sure enough, the DOL investment advice rule took effect Feb. 1, and a pair of lawsuits in federal courts quickly followed. “We’ve already got processes in place to eliminate the rogue advisors,” said Eric Couch, who runs ProVision Brokerage in Flower Mound, Texas. “We don’t have an insane amount of complaints. Advisors do what’s in the client’s best interest. At my 4
InsuranceNewsNet Magazine » April 2022
agency, that’s the first and last thing and everything in between.” Couch joined the Federation of Americans for Consumer Choice in a Feb. 2 lawsuit against the DOL in Dallas federal court. That court is within the Fifth Circuit, where the appellate court three years ago struck down the DOL’s prior fiduciary rule. About a week later, the American Securities Association filed a lawsuit in a Florida federal court. The lawsuits make a similar claim in slightly different ways: The DOL exceeded its authority with the investment advice rule. Written by the Trump administration, the investment advice rule has two main parts: a new prohibited transaction exemption allowing advisors to provide conflicted advice for commissions, and a reinstatement of the “five-part test” from 1975 to determine what constitutes investment advice. The Biden administration allowed the investment advice rule to take effect Feb. 16, 2021.
‘Same Old Wine’
The FACC lawsuit claims the DOL’s latest rule “carries forward the core problem the Fifth Circuit identified in vacating the Fiduciary Rule the first time,” adding that “pouring the same old wine into a new bottle does not change the result.” In 2018, the Fifth Circuit Court of Appeals tossed out the fiduciary rule, ruling that the DOL exceeded its authority by creating a new regulatory scheme for the retirement plan space. Writing the majority opinion, Judge Edith H. Jones said the DOL rule “fails the reasonableness test” in extending its ERISA authority to one-time IRA rollovers and similar transactions. Some analysts say the plaintiffs are getting ahead of themselves. For starters, there aren’t any cases yet to show the impact of the rule. “They haven’t enforced it against anybody yet,” noted Fred Reish, partner with Faegre Drinker. “Is there a true case or controversy, which is needed to have a lawsuit, if there hasn’t been any action taken by the government to actually enforce
