While the Labor Department has promised a temporary enforcement reprieve of the fiduciary rule, that guarantee does not do enough to address potential confusion in the marketplace, say some industry stakeholders.

The U.S. Chamber of Commerce, the Securities Industry Financial Markets Association, and a consortium of other industry trade groups that are appealing a decision to uphold the fiduciary rule in the 5^th Circuit Court of Appeals, have asked a Texas federal court to delay the April 10 applicability date until the appellate court rules on the case.

Last week, the Labor Department published a temporary enforcement policy for the rule. In doing so, regulators were addressing the potential for the proposed 60-day delay of the rule to be issued after the April 10 scheduled implementation date.

While the Department said it “believes it will issue a decision” to delay the rule before the April 10 implementation date, the potential for confusion if it fails to issue a delay in time warrants the temporary enforcement relief, explained regulators in a field bulletin.

In its request to delay the rule’s applicability date until the 5^th Circuit rules on the decision to uphold the rule, the Chamber claims Labor’s proposed 60-day delay is not enough to address the disruption the rule is expected to cause industry.

“The Department may be unable to finalize its rulemaking (to delay the rule) before the beginning of April,” wrote attorneys for the plaintiffs in the injunction request.

“In the meantime, industry participants will have no choice but to continue to sink extensive resources into developing their compliance capabilities—and continue to incur irreversible financial costs and operational disruptions. Moreover, a 60-day extension is unlikely to be long enough for this litigation to run its course.”

Judge Barbara Lynn, the chief judge for the Northern District of Texas, recently issued a sweeping ruling upholding the fiduciary rule.

Nonetheless, the plaintiffs insist they have a “compelling case on the merits,” which could sway the 5^th Circuit.

“If the Court of Appeals accepts one or more of those challenges, the result would be to strike down or substantially limit the Rule’s scope,” the request for injunction says.

If the appellate court were to do so after the rule is implemented, the potential disruption to industry and confusion among retirement investors would be significant, argue the plaintiffs.

“That relief will be incomplete if it comes after industry participants have incurred substantial and irreparable financial costs, operational burdens, employment changes, and disruptive transformations of their relationships with many retirement savers,” according to court documents.

Previous attempts to stay the rule’s implementation date pending appeal have fallen on deaf ears.

The National Association of Fixed Annuities requested a delay of the rule until its appeal was decided in the D.C. Circuit Court of Appeals. That request was denied.

But the Chamber and SIFMA argue their request is being made under new circumstances.

The fact that Labor is undertaking a new economic and legal analysis of the rule that could result in it being withdrawn or rewritten means a delay is in the public’s best interest.

“With the Department itself seeking to extend the Rule’s applicability date while it considers whether to rescind or revise the Rule, the public interest heavily favors an injunction so that the serious questions about the Rule’s validity can be resolved without further wasteful, unwarranted, and unrecoverable costs being incurred first,” the plaintiffs said.

Delaying the rule for a few more months while an appeal is considered would not create “hardship” for the public, claim the plaintiffs, as it would simply extend a regulatory framework the Labor Department has been fine with “for decades.”

Erin Sweeney, an attorney with Washington D.C.-based Miller & Chevalier, thinks the Chamber presents a much stronger case for a delay pending appeal compared to NAFA’s earlier request, which came before President Trump ordered a new review of the rule.

“The Chamber's conclusion that an injunction would be ‘efficient for all involved’ is persuasive because it will save the Department from an accelerated review process that is not likely to be completed by April 10,” said Sweeney in an email.

“The possibility of uncertainty in the industry – and the specter of two major changes in the regulatory environment--militates in favor of an injunction,” she added.

The American Council of Life Insurers filed a separate motion for an injunction seeking to delay the implementation date until the 5^th Circuit rules. Both motions request a decision from Judge Lynn on the delay by March 20.

Attorneys for the Labor and Justice Departments have said they will oppose the motion to delay the rule, according to court documents.

The 15-day comment period for the Labor Department’s proposed 60-day delay of the rule closes March 17. Hundreds of comments from stakeholders and the public have already been received. Several larger stakeholders have suggested the Labor Department propose a longer delay to account for it’s the new analysis of the rule ordered by the Trump administration.

Instant Insights /

Plaintiffs in Texas ask fiduciary rule to be delayed until 5th Circuit rules on appeal

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