Despite the Department of Labor’s claims to the contrary, its latest proposed fiduciary rule is a repackaging of “the deeply flawed” and legally vacated 2016 fiduciary rule, the Financial Services Institute (FSI) said in its latest comment letter on the proposal.

“The Proposal will again fail in court as regulatory overreach inconsistent with ERISA,” Dale Brown, FSI’s CEO and president, said.

“As was the case with the 2016 rule, the proposal will not survive judicial scrutiny,” Brown predicted in his letter.

FSI was one of nine plaintiffs that successfully sued the DOL in 2018 and forced the Obama-era fiduciary rule to be vacated.

While noting that the trade group, which advocates for independent financial advisors and financial services firms, supports the current fiduciary standard, Brown said the current proposal “exceeds the Department’s authority and lacks any empirical justification….The proposal will again fail in court as regulatory overreach inconsistent with ERISA.”

While the DOL claims in its proposed package that Congress appointed the DOL the ultimate “standard of conduct regulator for investment and insurance professionals, courts have found that not to be the case, Brown noted.

In fact, the latest proposal will need to be evaluated against the Fifth Circuit Court of Appeals Chamber of Commerce v. DOL opinion, which admonished the DOL for “its overreaching definition” of investment advice fiduciary.

Specifically, the court found that the DOL’s definition of “fiduciary” was inconsistent with the plain text of ERISA and the Internal Revenue Code, as well as with the common-law meaning of “fiduciary,” which depends upon a “special relationship of trust and confidence” as defined by Congress in 1974.

As a result, the court found that DOL impermissibly overstepped its authority by imposing expansive new duties on advisors and ion broker-dealers and insurance agents who sell annuities to IRAs.

As a result, the court held that the fiduciary Rule and the exemptions were “arbitrary, capricious, and unlawful” under the Administrative Procedure Act and vacated the package in total in 2018.

The FSI and other securities and insurance trade groups including Sifma, which was a co-plaintiff with FSI in their winning 2018 challenge, are arguing that the latest rule is again a reach that exceeds the agency’s authority, based on a multitude of court opinions.

While the DOL uses the premise that investors believe they are getting fiduciary advice when they engage with brokers and insurance agents as justification for the proposed rule, FSI said that the other court decisions, including the Fourth Circuit’s decision in Nationwide Mutual Ins. Co. v. Darden, make that argument “fatally flawed” because it does not start from Congress’s 1974 definition of investment advice, but rather with the expectations and interests of retirement investors, Brown said.

“Expanding the scope of DOL regulation in vast and novel ways is valid only if it is authorized by the authority that Congress delegated it by statute,” Brown added.

Brown also said in his comment letter to the DOL that it is not the appropriate “standard of conduct” regulator for the financial services industry; that responsibility falls under the SEC’s jurisdiction.

“The SEC has already provided a ‘best interest standard’ for investors under Reg BI, including when retirement account-related rollovers are recommended to investors,” Brown said.