DOL Fiduciary Rule – Upheld – or Not!?!?

Here’s the Skinny,

The 10th District Court of Appeals just upheld the DOL Fiduciary Rule. It was “argued that the DOL rule treated fixed indexed annuities arbitrarily by forcing the products under the best-interest contract exemption, a provision of the regulation that allows brokers to earn variable compensation as long as they sign a legally binding contract to act in the best interests of their clients.”

Currently, Fixed indexed annuities “operate under the same exemption of federal retirement law as fixed annuities. But the DOL put them under the so-called BICE due to their complexity and the potential conflicts of interest associated with their sales.” 

It was also argued that the “DOL violated rule-making procedures and didn’t do a proper economic impact analysis in promulgating the fiduciary rule.”

“The 10th Circuit judges held that DOL followed appropriate administrative procedure, was fair in its treatment of fixed indexed annuities and that it conducted an appropriate economic analysis.”[1]

And yet, on March 15, 2018, the Fifth Circuit Court of Appeals…

“Held that the agency exceeded its statutory authority under retirement law – the Employee Retirement Income Security Act.

The judges criticized a key provision of the rule, the best-interest-contract exemption. The BICE allows brokers to receive variable compensation for investment products they recommend, creating a potential conflict, as long as they sign a legally binding agreement to act in a client’s best interests.

‘The BICE supplants former exemptions with a web of duties and legal vulnerabilities,” the majority opinion states. “Expanding the scope of DOL regulation in vast and novel ways is valid only if it is authorized by ERISA Titles I and II.'”[2]

And so, the battle quietly rages on, oddly feeling as though the DOL Fiduciary Rule is heating up again given all the recent press and State activities.  KEEP IN MIND, if you are not properly adhering to the regulatory constraints of the DOL Fiduciary Rule’s “extended delay” (through July 1, 2019), you are placing yourself in significant jeopardy.

For more information click & refer to these previous Advisor Skinny posts…

That’s the Skinny,

 

 

  1. March 13, 2018, Investment News, “Appeals court upholds DOL fiduciary rule in case involving fixed indexed annuities”
  2. March 15, 2018, Investment News, “Fifth Circuit Court of Appeals vacates DOL fiduciary rule”

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