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DOL Fiduciary News: March 21, 2018

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Tough Process Questions Raised by Fifth Circuit Fiduciary Rule Decision

PLANSPONSOR; March 20, 2018

Steven Rabitz is a compensation and benefits partner with Stroock in New York; his firm provides transactional and litigation guidance to investment advisory corporations, banks and venture capital firms.

Like many other attorneys whose work regularly touches on the Employee Retirement Income Security Act (ERISA), Rabitz has been hard at work this week fielding questions about the fate of the Department of Labor (DOL) fiduciary rule expansion. As readers likely already know, the decision that emerged this week out of the Fifth U.S. Circuit Court of Appeals threw a dramatic new element of confusion into the epic regulatory saga that has been the rollout of the Department of Labor fiduciary rule. The Fifth Circuit’s two-to-one majority ruling wholly rebukes the long-running fiduciary rule expansion as an abusive overreach of the DOL’s authority—this after numerous district courts have strongly upheld the DOL’s rulemaking process.

To help ease the immediate concerns and confusion of clients, Rabitz and his firm have published a helpful guide that dissects the latest fiduciary rule developments. On his assessment, it actually is not that likely that the U.S. Supreme Court will get involved.

“While there has been some discussion that other recent decisions in other circuits addressing the fiduciary rule may now result in a ‘split,’ no decision appears more sweeping or broad concerning the underlying legality of the fiduciary rule than the decision from the Fifth Circuit,” Rabitz explains. “Moreover, because of the Constitutional nature of the decision, future administrations—regardless of party—may have difficulty resurrecting the fiduciary rule or similar sweeping changes to the original fiduciary rule, absent Congressional action.”

Advisors in Suspense As DOL Contemplates Fighting for Its Rule

Financial Advisor; March 20, 2018

How bad will the fallout be from the Fifth Circuit Court of Appeals decision to vacate the U.S. Department of Labor’s fiduciary rule?

That will depend greatly on what the DOL does next. The agency can ask the Fifth Circuit to rehear the case or it can seek permission to appeal the decision to the Supreme Court. While there is a growing contingent that believes or hopes the DOL will let the rule die, attorneys at Drinker Biddle said in a legal brief today that the fate of the rule isn’t certain and it is premature to count the DOL out just yet.

“We believe there is a fair chance that the DOL will seek to have the decision overruled even as [it] continues its regulatory process to review and likely amend the rule,” Drinker Biddle wrote.

Such legal processes could stretch out for a year or more with legal stays.

If that happens, said Drinker Biddle, “we think the DOL will propose a new regulation and exemptions during that time, which will start an entirely new process.”

The court’s ruling to vacate the entirety of the DOL rule applies nationwide, though the rule will not formally be vacated until May 7, 2018, at the earliest. The DOL has 45 days from the entry of the judgment to request that all the Fifth Circuit judges rehear the case.

It’s worth noting that the dissenting judge was the chief judge of the court.

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