The Fifth Circuit is generally considered to be one of the most conservative courts in the country, with decisions frequently defining the government’s role narrowly.
“It makes sense that from a regulatory perspective the court would want to wait to see what the DOL decides before imposing its own decision,” Ashton said.
The first phase of the fiduciary rule went into effect June 9. It requires advisors and agents working with qualified accounts such as retirement plans and IRAs to act as fiduciaries, make no misleading statements and accept only “reasonable” compensation. But on August 31, the DOL issued its proposal to extend the transition period for three prohibited transaction exemptions until July 1, 2019.
The hotly contested exemptions are required by the DOL in order to sell variable and fixed indexed annuities.
The exemptions up for DOL review are the Best Interest Contract Exemption (BICE), the 84-24 exemption (for sale of annuities and insurance products), and the Principal Transactions Exemption, all of which could be modified by the DOL before July 1, 2019.
While there are obviously some industry holdouts given the 22 plaintiffs in the pending appeal, the DOL rule is fast becoming standard operating procedure at most companies, said Marcia Wagner, principal of the national law firm Wagner Law Group.
“We will definitely see some changes and development in the law over the next 18 months, but the basic takeaway is that this law is already established and I don’t think the courts would be able to undo it even if they wanted to,” Wagner said. “The vast majority of firms have really embraced fiduciary standards for retirement accounts and IRAs.”