November 08, 2017

Labor Department may be cleared to delay fiduciary rule implementation

Alexander Acosta

On November 2, United States Secretary of Labor Rene Alexander Acosta in a court filing told a federal court in Minnesota—which is handling Thrivent Financial for Lutherans’ case against the Labor Department over the fiduciary rule—that the Labor Department will likely be cleared in three weeks to officially delay the full implementation of its fiduciary rule. Acosta stated that “Typically administrative actions such as these take three weeks from the time of review by [the Office of Management and Budget (OMB)] to be published as final.”

Meanwhile, the National Association for Fixed Annuities (NAFA) requested the U.S. Court of Appeals for the D.C. Circuit to delay the December 8 oral arguments in NAFA’s appeal over a federal court’s denial of its bid to block the fiduciary rule. Notably, Acosta filed with the OMB the official 18-month delay of its fiduciary rule.

According to a leading financial daily, NAFA’s General Counsel and Director of Government Affairs, Pam Heinrich, stated that NAFA asked for a delay in the December 8 oral arguments because “We feel that in light of the uncertainly surrounding the proposed delay rule and the uncertainty regarding any outcome in the litigation in the other circuits, and for judicial economy, we could wait till we have a little more clarity on the issues affecting NAFA’s appeal.”

Notably, NAFA did not ask the court to cancel the hearing. On the other hand, Heinrich stated that NAFA and others are still awaiting a decision in the 5th U.S. Circuit Court of Appeals case brought by nine plaintiffs (including the U.S. Chamber of Commerce, the Securities Industry, and Financial Markets Association and the Financial Services Institute) against Labor’s fiduciary rule.

According to Heinrich, “Court watchers had anticipated a decision already” given that the oral arguments in that case took place on July 31. “A decision in that circuit could very well affect the issues before the D.C. Circuit,” Heinrich said.

The judge presiding over the Thrivent case in Minnesota granted a preliminary injunction in favor of Thrivent, which has been fighting to halt the anti-arbitration clause set out in the rule’s Best Interest Contract (BIC) Exemption. The injunction ensures that at least until the litigation is concluded, Thrivent would not face enforcement actions or excise taxes for non-compliance with the BIC. The firm has argued that the anti-arbitration rule would harm its business.

Judge Susan Richard Nelson, US District Court Judge for the District of Minnesota, said, “The Court finds that Thrivent has sufficiently demonstrated the threat of irreparable harm, both now and in the future.”

Judge Nelson then said, “While monetary loss alone does not warrant injunctive relief, the current state of regulatory limbo threatens Thrivent with harm that cannot be remedied monetarily. In order to comply with the anti-arbitration condition’s applicability date, Thrivent must take actions now that involve changes to its business model. In addition to the expenditure of time and money that these changes necessitate, undertaking such changes may irreparably disadvantage Thrivent against its competitors and with respect to its members.”

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