Trade Groups Decry Feds’ New Investment Rule

DALLAS (CN) - The Labor Department's new 1,023-page rule that imposes a fiduciary duty on investment professionals will hurt people who save for retirement and exceeds the department's authority, trade and business groups claim.

Lead plaintiff U.S. Chamber of Commerce sued the U.S. Department of Labor in Northern Texas Federal Court on Wednesday.

The group opposes regulations announced in April that impose fiduciary duties on brokers and registered investment advisors for people who have individual retirement accounts and 401(k) plans.

Co-plaintiffs include local chambers of commerce in Irving, Humble, Lake Houston and Lubbock, Texas.

The plaintiffs say the new rule "creates sweeping changes" that make saving for retirement more difficult. They say advisors working on small business plans will have no choice but to stop servicing such plans.

"It specifically hinders many of our member firms' ability to continue providing the level of holistic financial advice and suitable investment options their clients are accustomed to," the plaintiffs said in a statement Thursday morning. "The rule will shackle Main Street financial advisors with extensive new requirements and constant liability, forcing them to limit the options and guidance they provide to retirement savers."

The trade and business groups say the rule will "upend" the preexisting regulatory framework for investment professionals by making them fiduciaries under the Employee Retirement Income Security Act and Internal Revenue Code.

"The rule makes it impossible to sell most individual retirement investment products without being deemed a fiduciary," according to the complaint.

The groups say sufficient regulations by other agencies already exist.

"In providing both fiduciary and non-fiduciary services, financial professionals and their firms abide by exacting standards of care established by the SEC, FINRA, state insurance departments, and state securities departments," the 74-page complaint states. "Serving the best interest of customers has been and remains a paramount commitment of the industry, which has long supported the SEC's development of a uniform standard requiring professionals to act as fiduciaries when providing personalized investment advice about securities to retail customers."

Labor Department officials did not immediately respond to an email message requesting comment Thursday afternoon.

The plaintiffs seek a declaration against the rule for violations of the Administrative Procedure Act and the First Amendment. They are represented by Eugene Scalia with Gibson, Dunn & Crutcher in Washington, D.C.

Follow @davejourno

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