Washington, D.C., June X, 2024 – The Financial Services Institute (FSI) and Securities Industry and Financial Markets Association (SIFMA) joined a federal lawsuit today in the Northern District of Texas, seeking to strike down a recently finalized Department of Labor (DOL) rule that unlawfully expands the definition of a “fiduciary” and jeopardizes investors’ access to advice and education.

Today’s legal complaint notes that the new rule is materially indistinguishable from a 2016 DOL rule that was struck down by the Fifth Circuit in 2018: “like the 2016 Rule, the 2024 Rule is inconsistent with the common law, contravenes the statutory text, and impermissibly attempts to regulate the provision of services to accounts over which the Labor Department has no regulatory authority.  Indeed, the illegality of the 2024 Rule is even clearer today….”

In 2019 the Securities and Exchange Commission (SEC)—the federal agency Congress actually created to regulate broker-dealers—adopted Regulation Best Interest (Reg BI), which the Department itself admits largely instituted the standards for broker-dealers that the Department’s 2016 Rule had (illegally) sought to impose.

With Reg BI, the needs case for the Department’s unlawful regulation of broker-dealers vanished.  In Reg BI, moreover, the SEC rejected the very thing that the Department—which is an employment regulator, not a broker-dealer regulator—boasts of having imposed here:  promulgation of ”a uniform standard of conduct [for] all financial professionals regardless of how they engage with their retail customers” as stated in the complaint.

The DOL rule not only lacks statutory authority, but also violates the Administrative Procedure Act because it lacks both rational justification and adequate cost-benefit analysis.

Notably, the complaint does not challenge the prohibited-transaction exemption (PTE) 2020-02 (which some broker-dealers utilize in situations where they are fiduciaries under the Department’s 1975 test) or the Department’s recent amendments to that exemption.

FSI and SIFMA ask the Court to vacate and set aside the 2024 Rule and declare it to be in excess of the DOL’s statutory authority, arbitrary and capricious, and otherwise not in accordance with law.

The full plaintiff-intervenors’ complaint filed in this case, American Council of Life Insurers, et al. v. United States Department of Labor, can be found here.

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The Financial Services Institute (FSI) is the only organization advocating solely on behalf of independent financial advisors and independent financial services firms. Since 2004, through advocacy, education and public awareness, FSI has successfully promoted a more responsible regulatory environment for over 80 independent financial services firm members and their 130,000+ affiliated financial advisors – which comprise over 45% of all producing registered representatives. We effect change through involvement in FINRA governance as well as constructive engagement in the regulatory and legislative processes, working to create a healthier regulatory environment for our members so they can provide affordable, objective advice to hard-working Main Street Americans. For more information, please visit financialservices.org.

SIFMA is the leading trade association for broker-dealers, investment banks and asset managers operating in the U.S. and global capital markets. On behalf of our industry’s nearly 1 million employees, we advocate for legislation, regulation and business policy affecting retail and institutional investors, equity and fixed income markets and related products and services. We serve as an industry coordinating body to promote fair and orderly markets, informed regulatory compliance, and efficient market operations and resiliency. We also provide a forum for industry policy and professional development. SIFMA, with offices in New York and Washington, D.C., is the U.S. regional member of the Global Financial Markets Association (GFMA). For more information, visit http://www.sifma.org.