Follow the Money.
Four Different Courts Have Upheld the DOL Fiduciary Rule.
Is it in America’s Best Interest for Donald Trump to Kill It?
Then Why Does he Want To?
Follow. The. Money.
The Court says: “The [DOL’s] rule changes will benefit retirement investors throughout the United States by requiring investment advisers to act in the best interest of those investors.” – Judge Daniel Crabtree
Here’s what the courts have said:
Minnesota Court Denies the Trump-DOL’s request for a stay
On Feb 21, Judge Susan Richard Nelson denied the new administration’s request for a stay. Hearing on Thrivent’s plea scheduled for March 3.
Texas Court Rules in Favor of Obama DOL Fiduciary Rule
In a legal challenge to the DOL Fiduciary Rule in Texas, led by Eugene Scalia, son of the late Supreme Court Judge Antonin Scalia, brought by two insurance company lobby groups and the US Chamber of Commerce, Chief Judge Barbara Lynn ruled resoundingly in the DOL’s favor on February 9th:
In the Texas case, Forbes reported: “U.S. Chamber of Commerce v. DOL, which was consolidated with cases filed by the Indexed Annuity Leadership Council (“IALC”) and the American Council of Life Insurers (“ACLI”), sought to vacate the fiduciary rule and associated rules that modify the regulation of conflicts of interest in the market for retirement investment advice. Judge Barbara Lynn denied the plaintiff’s motion for summary judgment, and upheld the DOL’s motion for summary judgment, in an 81-page opinion, shooting down each of the plaintiff’s seven key challenges to the fiduciary rule in turn.
Reuters said, of the Texas Court’s ruling: “The court finds the DOL adequately weighed the monetary and non-monetary costs on the industry of complying with the rules, against the benefits to consumers,” Lynn wrote. “In doing so, the DOL conducted a reasonable cost-benefit analysis.“
Kansas Judge Rejects Insurance Group Plea to Halt DOL Fiduciary Rule
Last November, Market Synergy Group sued the DOL, asking the court to halt the DOL Fiduciary Rule while its legal challenge to the Rule was decided. Market Synergy sells Fixed Indexed Annuities – products that often harm retirement investors because of the high up-front and recurring commissions and fees that the investor pays, often unknowingly, out of his or her nest egg. The court refused to delay the Fiduciary Rule because it would not be in the public interest to do so.
Then, on Feb 17, Judge Daniel Crabtree denied the Market Synergy lawsuit entirely. P&I covered the ruling: “Writing that the plaintiff did not meet the criteria for an injunction, U.S. District Judge Daniel Crabtree agreed with the Department of Labor. In the order, Mr. Crabtree said, “An injunction will lead to confusion about the law and likely produce unwarranted delay. This is not in the public’s interest. Any injunction thus will produce a public harm that outweighs any harm that plaintiff may sustain from the rule change.”
P&I quoted Judge Crabtree further: DOL “has concluded that significant public interests favor the proposed regulatory changes. As already explained, evidence in the administrative record supports the DOL’s determination, and the court finds no basis for contradicting those findings.”
Washington Court Rejects Insurance Lobby Challenge of DOL Fiduciary Rule
An insurance lobby group, National Association for Fixed Annuities, sued DOL to stop the Fiduciary Rule. Washington DC Court’s rejection of another insurance lobby group’s legal challenge to the DOL Fiduciary Rule:
On Nov 23 U.S. District Judge Randolph Moss denied the appeal pleading for a halt to the DOL Fiduciary Rule. Judge Moss’s Court found that:
I. NAFA Cannot Prevail on the Merits of its Six Claims
II. For Additional Reasons, NAFA is Not Entitled to a Preliminary Injunction
“The Balance of Equities and the Public Interest Weigh Against Any Injunction in this Case,” Judge Moss wrote in his opinion.
What do all of these cases have in common? Follow the money.
The lawsuits against the DOL Fiduciary Rule were brought by lobby groups for insurance companies, broker-dealers, banks and mutual fund companies, which generally have not worked as fiduciaries to retirement investors. The companies and their representatives – insurance agents and registered representatives of broker-dealers – were able to recommend or sell products that enriched the agent/rep and their firm, literally at the expense of the retirement investor. They advised both individual retirement investors and retirement plans.
For example, agents or reps could steer the mutual fund line-up for a 401(k) retirement plan into high commission, high revenue-sharing funds that paid much more than a reasonable amount to the representative, agent and their firm. The investor always pays those costs, either directly or indirectly.
When these costs are unreasonable, the retiree’s nest egg can be cut in half. The firms also could steer retirement plans to use their “platform” recordkeeper or administrator – often in a bundle. While there are some very good ones that do a fine job at a reasonable cost, sometimes the recommended recordkeeper or administrator charged fees in excess of “reasonable.” That also harms the investor’s nest egg.
Just 2% in excess commissions or fees reduces retirees’ nest eggs by at least half. As investors save during their working years, just 1% in excess fees strips out 28% of their nest egg, leaving retirees with less to put to work in the American economy during the retirement years, and more reliant on Social Security.
That is why it is in the public interest that the DOL’s Fiduciary Rule becomes applicable on April 10th, with no delay or obstruction.
We hope the Trump Administration and Office of Management and Budget will recognize that there is no compelling reason for any delay. The cost-benefit analysis already in place from DOL was already approved by OIRA. There is no reason for any delay – and in fact, any delay will cost retirement investors billions of dollars every month.
As Judge Crabtree said: “Any injunction thus will produce a public harm that outweighs any harm that plaintiff may sustain from the rule change. The DOL has determined that the rule changes will benefit retirement investors throughout the United States by requiring investment advisers to act in the best interest of those investors. Congress authorized the DOL to evaluate these competing interests and it has concluded that significant public interests favor the proposed regulatory changes. As already explained, evidence in the administrative record supports the DOL’s determination and the court finds no basis for contradicting those findings.”
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