Second court blocks all aspects of DOL’s fiduciary rule

investmentnews.com:

A group of insurance industry groups has succeeded in getting the DOL’s new fiduciary rule and prohibited transaction exemptions temporarily blocked.

On Friday, a federal district court issued a stay in the effective date of the Department of Labor’s regulation and the amended exemptions. That added to a similar order in a separate case a day earlier that applied to the rule itself but only one of the exemptions, PTE 84-24, which applies to commissions on non-security insurance products recommended in IRA rollovers. Friday’s order applies to the rule, PTE 84-24, PTE 20-02, and all of the other exemptions associated with the new rule, including PTE 75-1, 77-4, 80-83, 83-1, and 86-128.

Both courts, which are in different districts in Texas, sided with the plaintiffs, citing a high likelihood that they would prevail in their cases against the rule.

“Plaintiffs are virtually certain to succeed on the merits,” the order issued in the Northern District of Texas Fort Worth Division read. “Not only is the rule likely unlawful, it [is] also likely to cause irreparable harm to the plaintiffs.”

That alleged harm includes increased compliance costs and higher regulatory burdens, as many insurance agents who never have had to comply with the Employee Retirement Income Security Act would become fiduciaries in connection with one-time annuity sales in IRA rollovers, according to the court records.

The new rule and its amended exemptions are intended to bring a higher level of protection to retirement savers, as fiduciary status isn’t mandatory for one-time recommendations given as part of a rollover. The rule was slated to begin taking effect in September, with aspects of it being phased in until April 2025.

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