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By: Theodore C. Peters
On March 15, 2018, the Fifth Circuit Court of Appeal stuck down the “fiduciary rule” proposed by the Department of Labor (DOL), which required brokers to act in the best interests of their clients in retirement accounts. Subsequently, there was much speculation as to whether the Department of Justice (DOJ), acting on behalf of the DOL, would appeal that decision. The April 30, 2018 deadline for the DOJ to appeal came and went, but …. nothing. The Fifth Circuit’s ruling, therefore, is slotted to take effect on May 7, 2018.
In late April, AARP and several state attorneys general (including California, New York and Oregon) joined forces in seeking the court’s permission to intervene as defendants in the case, and also sought an en banc hearing before the entire 17-judge circuit. AARP contends that the court’s decision striking down the DOL rule puts Americans’ retirement security at substantial risk, resulting in an “issue of exceptional importance.” The plaintiffs in the case, opponents of the DOL rule, formally opposed the motions to intervene on April 30. Counsel for the plaintiffs charged that the “last-minute motions do not come close to justifying their unprecedented bid to intervene…”
On May 2, the Fifth Circuit denied the intervenors’ motions. The court’s decision looks to be the final nail in the coffin holding the DOL’s fiduciary rule. Despite this ruling, however, the DOL still has one more card it could play – it can file a petition by June 13 to have the Supreme Court hear the case. Even if the DOL stands quietly by and does nothing, the Supreme Court could conceivably take the case up on its own.
Ultimately, this legal brouhaha focuses attention on the SEC, which is currently taking public comment on newly proposed standards of conduct for brokers and advisors.
If you have questions or would like more information, please contact Ted Peters at [email protected].