5th Circuit Court Denies Appeal of Its Decision on the DOL Fiduciary Rule

The 5th U.S. Circuit Court of Appeals, which in March ruled the Department of Labor (DOL) had overstepped its authority in issuing its Fiduciary Rule, has now rebuffed a second appeal of that decision filed by the attorneys general of California, New York and Oregon. The three-judge panel hearing the appeal also refused to refer the matter to a hearing by the full court, a process known as en banc review.


West Courtroom

The DOL Fiduciary Rule would require all retirement advisers to put the interests of their clients first, ahead of their own compensation for the products they recommend, and thus it’s also known as the Best Interest Rule.

Though the 5th Circuit Court ruled against the Fiduciary Rule, it has not yet issued an injunction against it, so it technically remains on the books. After the court’s ruling on March 15, however, the DOL basically said it would not enforce the new standard, and the agency recently issued guidance affirming that it would largely remain on the sidelines.

This latest filing, which was actually an appeal of a May 2 adverse decision by the same circuit court panel, exhausted the appeals process at the circuit level, and now it is up to the DOL or Department of Justice (DOJ) to file an appeal with the Supreme Court, which appears unlikely. Those agencies have until June 13 to file an appeal.

Meanwhile, the Securities and Exchange Commission (SEC) has issued a proposed fiduciary rule of its own, which is now in a public commentary period that closes on Aug. 7.

The DOL rule actually placed stricter requirements on brokers, specifically those who market retirement plans, mandating that they put their clients’ best interest first (that is, not the broker’s commission to be earned).

Specifically, the newer SEC proposal requires that brokers disclose all “key facts” about potential conflicts and mandates that they have a “reasonable basis” to conclude investment products are in their clients’ best interest, the agency said in a statement. It would also require that firms note and mitigate “material conflicts of interest” related to financial incentives.

NOTE: The details in this blog are provided for informational purposes only. All answers are general in nature and do not constitute legal advice. If legal advice or other expert assistance is required, the services of a competent professional should be sought. The author specifically disclaims any and all liability arising directly or indirectly from the reliance on or use of this blog.
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