Thomas Perez
Photo by Diego M. Radzinschi/NATIONAL LAW JOURNAL
The U.S. Chamber of Commerce and other business and financial industry groups sued in federal court Wednesday to block a new U.S. Labor Department rule that raises the standards stockbrokers must meet when they give retirement guidance.
The complaint, filed in U.S. District Court for the Northern District of Texas, takes aim at a regulation known as the fiduciary rule, which requires stockbrokers managing retirement accounts to serve their clients’ “best interests”—a heightened standard designed to curb the billions of dollars in fees paid to the financial industry.
The complaint, filed by Gibson, Dunn & Crutcher, said:
“Serving the best interest of customers has been and remains a paramount commitment of the industry, which has long supported the SEC’s development of a uniform standard requiring professionals to act as fiduciaries when providing personalized investment advice about securities to retail customer. The rule the U.S. Department of Labor has promulgated in this case would upend this well-developed regulatory framework, with harmful consequences for retirement savers, small businesses, and tens of thousands of businesses—including many operating in North Texas and the Dallas-Fort Worth metroplex—that provide retirement advice, products, and services.”
The business groups contend the Labor Department rule “will limit consumer choice by forcing those who need retirement investment assistance to obtain it only by entering a fiduciary relationship, and bearing the accompanying costs, or to forgo it entirely.”
Before the Labor Department finalized the regulation in April, investment advisors were required to provide “suitable” advice, a looser standard that has been cited for enticing stockbrokers to direct clients toward larger fees or lean toward investments with higher commissions.
The financial industry had fiercely lobbied against the rule since the Labor Department first proposed it in 2010. The fiduciary rule was expected to draw a legal challenge. But Labor Department officials, including Secretary Thomas Perez, have said they are confident the rule will survive any suit.
“Every rule we take, people threaten us with litigation,” Perez said. “We had a very lengthy and deliberate process, and what people see when they review the rule is that we listened and made changes. I’m confident in what we’ve done on the policy front.”
Read More:
DOL Fiduciary Rule: The Good, the Bad and the Ugly
What Advisors Really Think of DOL’s Fiduciary Rule: ThinkAdvisor Poll
Lawsuits Won’t Stop DOL Fiduciary Rule, Perez Says
New Labor Department Rule Requires Stockbrokers to Act as Fiduciaries
