The DOL is defending the new fiduciary rule in a lawsuit brought by an insurance industry group

The Department of Labor, which finalized its new fiduciary rule on April 23 and was quickly hit by two lawsuits filed by insurers and annuity industry groups questioning whether the DOL overstepped its authority by creating a controversial rule updating the definition of an investment advisory fiduciary, has now responded for the first lawsuit, which was filed within days of the rule being finalized.

The Federation of Americans for Consumer Choice, a trade organization whose members include independent marketing organizations, insurance agents and agencies that sell fixed annuities, filed a lawsuit May 2 in the U.S. District Court for the Eastern District of Texas, arguing that the new regulations are “an attack on insurance agents selling annuities” and reflect the DOL’s deep-seated misunderstandings and bias against annuities. Additionally, the lawsuit claims that the DOL’s new definition of investment advisory is virtually indistinguishable from its 2016 Fiduciary Rule, which was repealed in 2018, and therefore “seeks to grant a motion to stay the Rule’s effective date and issue an interim injunction.” , according to the lawsuit. However, on June 14, the DOL filed a brief with the court arguing that the new regulations were consistent with applicable law and were materially different from the 2016 regulation, which was struck down by the 5th Circuit Court of Appeals. The new regulations focus on the relationship between an advisor and investor and how the advisor presents himself or herself, not that “each financial professional in any transaction will be considered a fiduciary,” according to the DOL. Moreover, the new regulations are consistent with the law, consistent with case law and will protect investors, the DOL argued.

The DOL has not yet responded to a second lawsuit filed May 24 by nine insurance industry associations, including the American Council on Life Insurers and the National Association of Insurance and Financial Advisors, seeking to repeal the fiduciary rule, which has the same legal flaws as the department’s fiduciary rule from 2016 because it exceeds the department’s authority and is unconstitutional, the lawsuit alleges. The new fiduciary rule is scheduled to come into effect on September 23.