DOL fiduciary rule lawsuit expands, as 2 financial trade groups want it halted too

Last week, the Financial Services Institute (FSI) and Securities Industry and Financial Markets Association (SIFMA) joined a federal lawsuit filed in May in the Northern District of Texas, seeking to strike down the recently finalized Department of Labor (DOL) rule that unlawfully expands the definition of a “fiduciary” and jeopardizes investors’ access to advice and education.

The two securities trade groups joined a lawsuit filed by the American Council of Life Insurers, the Insured Retirement Institute and seven other trade groups that were seeking to overturn the DOL’s fiduciary rule finalized April 23 because it “undermines the expertise of state authorities who are responsible for overseeing annuities.”

In a group statement, the associations said the 2024 version of the fiduciary rule suffers the same legal defects as the department’s 2016 fiduciary rule because it exceeds the department’s authority, is arbitrary and capricious, and is unconstitutional.

Simarily, the new complaint filed by the FSI, which represents financial advisors, and SIFMA, which represents broker-dealers, notes: “Like the 2016 Rule, the 2024 Rule is inconsistent with the common law, contravenes the statutory text, and impermissibly attempts to regulate the provision of services to accounts over which the Labor Department has no regulatory authority …,” according to a release.

The DOL, which finalized its new fiduciary rule on April 23 and was swiftly hit with two lawsuits by insurers and annuity industry groups questioning whether the DOL exceeded its authority in crafting a controversial rule that updates the definition of an investment advice fiduciary, responded to the first lawsuit filed by the Federation of Americans for Consumer Choice, which came within days of the rule’s finalization.

In court on June 14, the DOL filed a brief that argued that the new rule is compliant with existing law and is substantially different from a 2016 regulation that was vacated by the 5th Circuit Court of Appeals. The new rule focuses on the relationship between the adviser and the investor and how the adviser presents themselves, rather than “every financial professional in every transaction will be deemed a fiduciary,” according to the DOL. Furthermore, the new rule is lawful, consistent with case law and will protect investors, argued the DOL.

Related: DOL defends new fiduciary rule in lawsuit brought by insurance industry group

However, the FSI and SIFMA are arguing that the rule — while intended to strengthen protections for investors — would actually end up limiting their access to certain retirement products. The trade groups are asking the Court to vacate and set aside the 2024 Rule and declare it to be in excess of the DOL’s statutory authority.

The new fiduciary rule is set to go into effect Sept. 23.