WASHINGTON–A legal challenge has been filed to the Department of Labor’s fiduciary rule for brokers and registered investment advisers serving Americans with Individual Retirement Accounts (IRAs) and 401(k) plans.
Among other things, the suit alleges that the “private right of action” mechanism creates significant new legal risks for financial advisors, who will “face the threat of class action lawyers challenging their every move,” according to the plaintiffs.
The suit has been filed by the U.S. Chamber of Commerce, Financial Services Institute, Financial Services Roundtable, Greater Irving-Las Colinas’ Chamber of Commerce, Insured Retirement Institute, Lake Houston Area Chamber of Commerce, Lubbock Chamber of Commerce, Securities Industry and Financial Markets Association, and Texas Association of Business.
“Our organizations have a long, well-documented record of support for the creation of a uniform best interest – or fiduciary – standard of customer care for financial professionals providing personalized investment advice to retail investors,” the organizations said in a released statement. “The Department of Labor’s new, 1,023-page rule, however, creates sweeping changes to existing regulations that will make saving for retirement more difficult for the very same hardworking American families and individuals it claims to protect. 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.
“Instead of helping savers plan for retirement, the new rule will unfortunately restrict their access to affordable retirement advice and limit their options for saving,” the statement continues. “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.
“Advisors servicing small business plans will similarly be left with no choice but to limit or stop servicing the retirement plans offered by those job-creators, significantly reducing the retirement savings options available to their millions of employees. These consequences collectively reinforce that government officials failed to perform an adequate cost-benefit analysis during the rule’s development.”
The lawsuit asks the court to review whether the Department of Labor overstepped its boundaries.