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.