DALLAS (CN) — A Texas federal judge Wednesday rejected the national Chamber of Commerce’s challenge of the Department of Labor’s Obama-era rule that imposes fiduciary duties on retirement investment advisers.
U.S. District Judge Barbara M.G. Lynn granted summary judgment to the Department of Labor and denied summary judgment to the Chamber of Commerce of the United States. Lynn concluded the Department of Labor did not exceed its authority.
“Congress gave the DOL broad discretion to use its expertise and to weigh policy concerns when deciding how best to protect retirement investors from conflicted transactions,” Lynn’s 81-page opinion states. “Although BICE [the best interest contract exemption] may cover more advisers and institutions and its conditions may be more onerous than past exemptions, it does not follow that the DOL’s rules are within the orbit of the cases plaintiffs cite, nor that the DOL’s use of exemptive authority is unreasonable.”
The chamber sued the Labor Department in June 2016, claiming the fiduciary rule “creates sweeping changes” that make saving for retirement harder because advisers who work on small business plans will have no choice but to stop servicing such plans. They claimed the fiduciary rule violated the Administrative Procedure Act and the First Amendment.
The Labor Department conceded that the rule change would impose costs on advisers but said the costs “will be significantly outweighed” by the “enormous benefit” to retirement investors, according to its August 2016 motion for summary judgment.
Lynn concluded that Congress “did speak clearly” when it assigned the DOL power to “regulate a significant portion of the American economy” under the Employee Retirement Income Security Act.
The judge was not convinced the fiduciary rule violates the First Amendment by regulating the speech of investment professionals.
“The court finds the rules regulate professional conduct, not commercial speech, and therefore any incidental effect on speech does not violate the First Amendment,” Lynn wrote. “Under the professional speech doctrine, the government may regulate a professional-client relationship, as a ‘professional’s speech is incidental to the conduct of the profession,’ and the First Amendment ‘does not prevent restrictions directed at commerce or conduct from imposing incidental burdens on speech.’ Hines v. Alldredge, 783 F.3d 197, 201–02 (5th Cir. 2015).”
Lynn’s ruling came hours after Department of Labor attorneys asked the judge to delay her ruling for approximately one month as it reviews the fiduciary rule. President Donald Trump directed the agency to review it on Feb. 3.
In a statement Wednesday, the chamber lauded Trump’s decision to reconsider as “reflecting well-founded, ongoing and significant concerns” about the fiduciary rule.
“We continue to believe that the Department of Labor exceeded its authority, and we will pursue all of our available options to see that this rule is rescinded,” the chamber said.