The DOL rule and guidance has led to two lawsuits, both filed in the first week of February, which seek to overturn the existing regulation.
“Basically they both say the DOL is trying to regulate without writing a regulation by citing sub-regulatory guidance. One lawsuit filed in Texas literally says the DOL is trying to pour old wine into a new bottle, trying to do an end-run around on the Fifth Circuit Court of Appeals, which vacated a prior Obama-era rule,” Reish said.
“What do I think about all the litigation combined? The truth is it’s almost impossible to predict litigation. And regardless of which way this is decided at the trial court level, I think this will go all the way to appeal. By the time it [is decided], we may already have the new rule ... and that rule could moot much of the litigation because the old rule’s gone away,” Reish said.
The American Securities Association (ASA), which represents wealth management and capital markets interests of regional financial services firms, filed its lawsuit in the Middle District of Florida. The group’s suit claims that the DOL used agency guidance in the form of a "Frequenty Asked Questions (FAQ)" section to impose new obligations on retirement accounts that did not previously exist.
They also say the DOL is violating the Administrative Procedure Act of 1946 (APA), which governs the process that federal agencies develop and issue regulations, by not providing a rulemaking period to solicit public input.
The Federation of Americans for Consumer Choice, which represents insurance agents and agencies, filed a lawsuit in a Dallas federal court challenging the DOL rule a day earlier. In the suit, the FACC argues that the DOL lacks the authority to broaden the definition of financial advisors who must act as fiduciaries for retirement savers.