March 19, 2018 Practice Points

Fifth Circuit Strikes Down DOL Fiduciary Duty Rule

After Chamber of Commerce et al v. U.S. Department of Labor, what's next for firms and advisers?

By Julie Firestone

On Thursday, March 15, 2018, the Fifth Circuit vacated the DOL Fiduciary Duty Rule in its entirety, including the Best Interest Contract Exemption (BICE) and the amendments to Prohibited Transaction Exemption (PTE) 84-24, in Chamber of Commerce et al. v. United States Department of Labor, et al., No. 17-10238. The Fifth Circuit’s opinion reversed the decision of the Northern District of Texas.

Only two days earlier, on Tuesday, March 13, 2018, the Tenth Circuit upheld the DOL’s exclusion of indexed annuities from PTE 84-24, in Market Synergy Group, Inc. v. United States Department of Labor, et al., No. 17-3038. The Tenth Circuit’s decision affirmed the judgment of the Kansas federal district court.

The Fifth Circuit’s decision is much broader and more comprehensive than the Tenth Circuit’s decision, as the Fifth Circuit struck down not just amended PTE 84-24, but the expanded Fiduciary Duty Rule itself, the BICE, and the whole “comprehensive regulatory package.” Decision at p. 46.

The question now: Will the Supreme Court have to weigh in?

Firms and advisers who followed the DOL’s direction last year that it “expects financial institutions to adopt such policies and procedures as they reasonably conclude are necessary to ensure that advisers comply with the Impartial Conduct Standards,” should be wary of undoing that work based upon a Fifth Circuit decision that could end up before the Supreme Court. It may be better to stay the course for now.

For a fuller discussion of the DOL Fiduciary Duty Rule and BICE, see Briggs and Morgan’s blog at financialmarketslaw.com.

Julie Firestone is a senior counsel with Norton Rose Fulbright in Minneapolis, Minnesota.


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