While progressives issued warnings to retirees, Republican lawmakers were being denounced on Friday for celebrating a federal appeals court ruling against an Obama-era rule that required financial advisers to prioritize clients’ interests over their own when providing investment advice.
In a 2-1 decision on Thursday, the U.S. Court of Appeals for the Fifth Circuit vacated the so-called fiduciary rule by the Labor Department. The department said Friday that it will respect the court decision and temporarily hold off on enforcing the rule.
In response to the ruling, the Economic Policy Institute (EPI) said in a statement: “This common-sense rule has survived repeated court challenges, but special interests with deep pockets can persevere until they get the result they want. All this proves is how much conflicted advice contributes to Wall Street profits at the expense of retirement savers.”
Meanwhile, House Speaker Paul Ryan (R-Wis.) claimed on Twitter that the decision was “good news for the economy,” neglecting to mention the impact it will have on those seeking trustworthy guidance on retirement accounts and 401(k)s.
Ryan, however, was quickly shut down by independent journalist David Sirota as well as Randy “IronStache” Bryce, a Democrat who is challenging Ryan in the 2018 midterms.
The fiduciary rule, which has been strongly supported by consumer advocates, partially took effect in June 2017, but the Trump administration delayed its full implementation until at least July 2019. Now, its future is even more uncertain.
Click Here: Geelong Cats Guernsey
SCROLL TO CONTINUE WITH CONTENT
The two judges who opposed the rule on Thursday determined that the Labor Department had acted “beyond its expressly defined authority,” while the sole judge who dissented asserted that the department acted “well within the confines set by Congress in implementing the challenged regulatory package.”
“The court misapplied the law, deviated from the decisions of every other court to consider the rule, turned a blind eye to dramatic changes in the retirement landscape over the last 40 years, and worst of all, ignored the plight of tens of millions of Americans who lose tens of billions of dollars a year.”
—Stephen W. Hall,
Stephen W. Hall, legal director and securities specialist for consumer advocacy group Better Markets, said the majority decision was “riddled with flaws.”
“The court misapplied the law, deviated from the decisions of every other court to consider the rule, turned a blind eye to dramatic changes in the retirement landscape over the last 40 years, and worst of all, ignored the plight of tens of millions of Americans who lose tens of billions of dollars a year in lost retirement savings due to financial advisers’ conflicts of interest,” Hall explained.
“This decision is also a slap in the face to the dedicated and hardworking public servants at the [department] who labored for more than five years conducting rigorous analysis and outreach to all affected groups, including most prominently industry, who insisted on—and received—unprecedented access and input,” Hall added, urging the department to “pursue every possible avenue for challenging the court’s decision.”
The Labor Department must now decide how to proceed with the case, considering that the 10th Circuit Court upheld the rule—”albeit in narrower context”—earlier this week. It may request a ruling from a full appeals court, and the fight could eventually escalate to the U.S. Supreme Court.
Marcia S. Wagner, an employee benefits lawyer, told the New York Times she believes that “even though the Trump administration is not a strong supporter of the fiduciary rule, it will likely continue to defend the fiduciary rule against legal challenges.”
Another option for protecting consumers from investors’ conflicts of interest could come from the U.S. Securities and Exchange Commission, if the Labor Departments opts to end its effort.
“The SEC has said that it will propose a fiduciary rule for retail investment advice this year,” Investment News reported Thursday. “It could come out as soon as the second quarter.”