Five key Senate Democrats are concerned about the Labor Department’s current lack of defense of the fiduciary rule — and they want to know what the DOL plans to do going forward.
The May 17 letter, addressed to Secretary of Labor Alexander Acosta and signed by Sens. Patty Murray (D-WA), Sherrod Brown (D-OH), Cory Booker (D-NJ), Ron Wyden (D-OR) and long-time fiduciary rule proponent Elizabeth Warren (D-MA), expresses concern about the decision “not to defend the conflict of interest rule ensuring financial advisers are acting in their clients’ best interests, following a single negative decision by an appeals court on the rule, which was not consistent with the findings of other courts.”
The concerns arise following the March 15 decision by the 5th Circuit which, by a 2-1 vote held that the Department of Labor lacked authority to promulgate its fiduciary rule, reasoning that the rule’s interpretation of investment advice fiduciary was overreaching. Since then the states of California, New York and Oregon have tried — and been rejected — in their attempt to intervene in the litigation on behalf of the fiduciary rule, as has AARP. The three states subsequently asked the 5th Circuit to reconsider its decision denying the states’ motion to intervene in litigation involving the DOL fiduciary rule.
Concerned that the failure to defend the rule “will create more confusion and uncertainty for both consumers and the financial services industry,” the senators urged the DOL to “reverse course and continue defending its authority” under ERISA, by asking the U.S. Supreme Court to weigh in on the issue.
Citing (in a footnote) the previous court “wins” for the fiduciary rule, the senators claim that “allowing the Fifth Circuit’s decision alone to dictate the Department’s policy sets a dangerous precedent by failing to acknowledge the clear difference of opinion among the courts of appeals regarding the Department’s authorities.”
The letter harkens back to Acosta’s 2017 comment that having considered the record and the rulemaking process, he “found no principled legal basis” to delay the core provisions of the rule, going on to note that while the February 2017 Presidential Memorandum from President Trump had expressed concern that the rule would lead to an increase in litigation, “the uncertainty stemming both from the enforcement delays due to the Department’s review and the Department’s decision not to defend the rule have actually resulted in an increase in litigation” – and with “more expected due to the rise in the promulgation of state-level fiduciary rules.”
The letter closes with several questions to which the senators would like answers:
- What the Labor Department has done since the 5th Circuit decision to inform savers of their “lack of protections from conflicted retirement advice, now that the Department is no longer enforcing the conflict of interest rule.”
- Does the Labor Department plan to “defend its authority to protect retirement savers” and appeal the 5th Circuit’s decision to the U.S. Supreme Court (and if not, why not)?
- If the Labor Department does not appeal the decision, or if that decision is not overturned on appeal, “what will the Department do in the future to protect retirement savers from conflicted advice?”