Last week, industry groups filed two suits seeking to block the Labor Department’s new fiduciary rule governing IRA and other retirement-fund investment recommendations.
In the first, the U.S. and several local Texas Chambers of Commerce and the Securities & Financial Markets Association filed suit in Dallas (in the conservative Fifth Circuit). The suit calls the rule-making a usurpation of SEC authority (and Dodd-Frank’s specific authorization of the SEC to promulgate uniform fiduciary standard) that deliberately adopts an unworkable rule, then conditions exemptions from it upon the adoption of contract provisions and warranties that DOL has no authority to require or enforce. The suit asserts six claims that:
- DOL exceeded it rulemaking authority and acted contrary to its ERISA enabling enabling legislation (by regulating otherwise exempt IRA accounts, among others);
- The regulation unlawfully created private right of action (arguing only Congress can);
- DOL provided inadequate notice and comment in its rule-making process;
- The BIC’s class-action waiver ban is contrary to Federal Arbitration Act and the Supreme Court’s Conception decision;
- The BIC exemption’s requirements are an undue burden on truthful commercial speech, thus violate the First Amendment; and, finally,
- DOL’s economic-impact analysis was insufficient — the hallmark of Eugene Scalia’s successful prior challenges to several Dodd-Frank rule-makings.
The suit is Chamber of Commerce, et al. v. Perez, No. 3:16-cv-001476-G (N.D. Tex. filed June 1, 2016).
The next day, fixed-income annuity (“FIA”) providers also filed suit in the District of Columbia, arguing that the regulation wrongly moved FIAs from a prior exemption (PTE 84-24) and subjected them to the BIC exemption, without adequate notice in the rule-making and contrary to the state-regulation (of FIAs) mandate of Dodd-Frank (’33 Act § 77c note under Sec. 989J of Dodd-Frank). FIA providers also argue that creating a private right of action through regulation is contrary to Alexander v. Sandoval, 532 U.S. 275 (2001).
That suit is National Ass’n for Fixed Annuities v. Perez, No. 1:16-cv-01035 (D.D.C. filed June 2, 2016).
Labor Secretary Perez has vowed to fight both, saying the Department is confident of its action.