On March 16, 2018, in a split decision, the Fifth Circuit Court of Appeals struck down the DOL’s
fiduciary rule. The Court held that the DOL exceeded its statutory authority under the Employee Retirement Income Security Act (ERISA).
The judges took aim at one of the rule’s key provisions: the best interest contract exemption, which allows brokers to receive commissions on investment products as longas they sign a legal agreement pledging they’re acting in the best interests of clients.
“The BICE supplants former exemptions with a web of duties and legalvulnerabilities,” 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.”
This is a significant victory for financial industry groups who have long fought the rule. Currently, the DOL fiduciary rule, which was written under the Obama Administration, is partially implemented. Other portions are delayed under a review mandated by President Trump.
The DOL could ask the Fifth Circuit to rehear the case, or they could appeal to the Supreme Court. The BDA is currently working on our response to the SEC’s request forinformation on this topic. The SEC is expected to release a rule in 2018.