Attorneys generals intervene in lawsuit to protect retirees from dishonest financial advisors
April 27, 2018
Three attorneys general have filed a motion to intervene in Chamber of Commerce of the USA, et al. v. U.S. Department of Labor, et al. to defend regulations that require retirement investment advisors to put the interests of their clients above their own financial gain.
The regulations, known as the Fiduciary Rule, were proposed under the Obama administration and put into federal law standards for professionals who give investment advice to people saving for retirement. The New York, California, and Oregon attorneys general are intervening in the case to ensure that the rule is carried out.
“It’s common sense: financial advisors should act in their client’s best interest, not their own,” said New York Attorney General Eric Schneiderman. “The Fiduciary Rule is vital to protecting families in New York and across the country who are saving for their retirement.”
Three federal district courts and the Tenth Circuit Court of Appeals have upheld the Fiduciary Rule. But on March 15, a three-judge panel of the Fifth Circuit Court of Appeals issued a contested decision overturning the rule, with the chief judge of the Fifth Circuit dissenting. In addition to filing the motion to intervene, the attorneys general also have filed a petition to rehear the Fifth Circuit Court of Appeals decision. The petition will allow them to ask the 17-judge court to rehear the case and overturn the decision made by the three-judge panel.
In the motion to intervene and petition for rehearing, the attorneys general allege that the decision from the Fifth Circuit Court of Appeals:
- Will deprive millions of Americans of basic safeguards as they seek financial advice about their retirement investments.
- Will cost hardworking Americans saving for retirement tens of billions of dollars.
- Decided wrongly that the Department of Labor lacked authority to require financial advisors to Individual Retirement Account or IRA holders to act in their clients’ best interests.
- Conflicts with the decisions of three other courts, including the Tenth Circuit Court of Appeals, that have upheld the Fiduciary Rule.
More and more of today’s workers turn to investment accounts that would be covered by the Fiduciary Rule, in order to save for their retirement, Schneiderman said.
Without the rule, a worker whose retirement savings are in a retirement plan such as a 401(k), who then rolls his or her retirement savings into an IRA, could lose up to 23 percent of the value of those savings over 30 years of retirement due to conflicted advice. In addition, conflicted advice given for mutual fund investments alone could cost IRA investors between $95 billion and $189 billion over the next 10 years.
Last year, Schneiderman described the dangers of killing the Fiduciary Rule in a letter to the U.S. Department of Labor.
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