The Death of the Fiduciary Rule: the Fifth Circuit Vacates the Fiduciary Rule -
On June 21, 2018, the United States Court of Appeals for the Fifth Circuit officially vacated the Department of Labor’s (the “DOL’s”) Fiduciary Rule in toto. This follows the Fifth Circuit’s 2-1 decision on March 15, 2018 vacating the Fiduciary Rule after finding that it is “unreasonable,” as we reported here. The mandate had been expected since May 7 when the DOL indicated that it would not challenge the Fifth Circuit’s decision. This is despite the fact that three states and the AARP attempted to intervene in the case in order to defend the rule, which the Fifth Circuit rejected.
The 2016 Fiduciary Rule expanded the category of advisers who were considered fiduciaries with respect to plans subject to the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and individual retirement accounts (“IRAs”). The Fiduciary Rule generally required that financial services advisers act in the best interests of their clients by applying a higher standard than the rule that previously applied to investment advisers. It also established prohibited transaction exemptions (“PTEs”), including the “best interest contract” or “BIC” exemption, in order to allow service providers who became investment advice fiduciaries under the new rule to continue receiving compensation. Since President Trump took office, the Fiduciary Rule has been the focus of significant attention and several court cases challenging its validity were filed.
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