Uncertainty surrounding the Labor Department’s fiduciary rule continues after the U.S.
Court of Appeals for the 5th Circuit voted
in mid-March to nullify the 2016 rule.
Labor said shortly after the appeals court
ruling that because the 5th Circuit vacated the fiduciary rule in its entirety, “
pending further review, the Department will
not be enforcing the 2016 fiduciary rule.”
At the Securities Industry and Financial
Markets Association’s annual compliance conference in mid-March, though,
Securities and Exchange Commission
Chairman Jay Clayton said the appeals
court ruling won’t deter the securities
regulator from moving full steam ahead
with its own fiduciary rulemaking.
Seventy-two hours after the 5th Circuit
Court of Appeals struck down Labor’s
fiduciary rule, “It hasn’t affected the way
I’m approaching this” SEC fiduciary rulemaking, said Clayton during a question-and-answer session at the conference,
which took place in Orlando, Florida.
Ken Bentsen, president and CEO of
SIFMA, queried Clayton if the agen-
cy would release a fiduciary proposal
“soon.” Clayton responded: “Soon is fair.
From my perspective, the sooner the
better. I’m not sitting on this.”
Bentsen asked if the 5th Circuit deci-
sion would “affect [the SEC’s] timing”
on releasing its own fiduciary rule. “I
think there’s a lot going on there [in
the ruling] for what it means for the
Department of Labor,” Clayton replied.
“I haven’t had any discussions with the
Department of Labor on what it means
from a broader perspective of adminis-
trative law and the approach to admin-
istrative law. We’ll see, but as far as I’m
concerned, we’re moving forward.”
The U.S. Court of Appeals for the
5th Circuit voted 2-1 on March 15 to
vacate the Labor Department’s fiducia-
ry rule. The nine plaintiffs in the 5th
Circuit case included the U.S. Chamber
of Commerce, SIFMA and the Financial
The ruling came one day after Labor
won a case in federal court brought against
its fiduciary rule by Market Synergy
Group, an insurance distributor. The U.S.
Court of Appeals for the 10th Circuit ruled
that Labor did not “arbitrarily treat fixed
indexed annuities differently from fixed
annuities” under its final fiduciary rule.
Kansas-based Market Synergy Group
(MSG) had argued that Labor threw
FIAs under the fiduciary rule’s best-interest contract exemption, or BICE, at
the last minute.
“According to MSG, the DOL simply
did not give notice that it might exclude
FIAs from PTE 84-24 and therefore
did not give adequate notice of the final
rule,” the ruling states. “We are unpersuaded. The [notice of public comment
By Melanie Waddell
After Court Ruling, DOL Stops Enforcing
But SEC Chairman Jay Clayton says the agency he leads is moving forward
on its fiduciary proposal despite the court vacating Labor’s rule
SEC Chairman Jay Clayton