The National Association for Fixed Annuities Board of Directors has withdrawn its lawsuit challenging the Department of Labor Fiduciary Rule.
In a March 23 filing with the U.S. Court of Appeals for the D.C. Circuit, NAFA and the United States Department of Justice agreed to a voluntary dismissal of the appeal.
NAFA’s decision comes on the heels of the March 15 ruling by the Fifth Circuit Court of Appeals, which vacated the Fiduciary Rule in its entirety. The NAFA lawsuit was one of two lawsuits challenging the authority of the Department of Labor to issue the rule.
“We are very pleased the Fifth Circuit understood the harms the Fiduciary Rule created for middle American retirement savers. This ruling vindicates both NAFA’s and the Fifth Circuit plaintiffs’ chief concerns, and, as a result, we see no reason to continue to pursue our litigation in another federal circuit court,” said NAFA Executive Director Chip Anderson.
Washington D.C.-based NAFA brought its challenge to the Fiduciary Rule nearly two years ago in the D.C. District Court, while the Chamber of Commerce and several other trade organizations brought a similar challenge in the Northern District of Texas. The lower courts in both cases ruled in favor of DOL (upholding the rule), but, on appeal, the Chamber prevailed in the Fifth. NAFA believes the Fifth Circuit decision renders its case moot.
The controversial rule was partially implemented June 9, 2017, when the impartial conduct standards took effect, requiring fiduciary advisors to adhere to a best-interest standard when making investment recommendations, make no misleading statements and accept only “reasonable” compensation. Back on Nov. 27, the DOL announced that full implementation, which had been scheduled for Jan. 1, 2018, would be delayed for another 18 months.
Then came the March 15 ruling to vacate the rule in its entirety. If the DOL decides not to seek a review of the Fifth Circuit decision by April 30, the court’s mandate will go into effect May 7 and the Fiduciary Rule, including the partially implemented components, would dissolve. The DOL also has until June 13 to ask the U.S. Supreme Court to hear its appeal of the decision.
Industry companies have already invested millions to adhere to stricter standards set up by the rule, and now must remain vigilant to see what happens next – including the possibility that the DOL will allow the ruling to stand and the fiduciary rule issue will be taken up by the SEC.
“We still have a lot of work to do, but now we will focus our energies on promoting insurance regulations that properly recognize differences among financial products and the way those products are delivered,” NAFA’s Anderson said.
He added that NAFA will continue to engage with industry stakeholders, the NAIC, and other state and federal policymakers.
“We are confident that fixed annuities will always play an important role in meeting the needs of retirement-oriented consumers and will continue our fight to promote fair-minded regulation that give consumers real choice in a vibrant financial services marketplace,” Anderson said.