Monday, August 29, 2016

Public Citizen, Inc. has filed an amicus brief in support of the U.S. Dept. of Labor’s Fiduciary Rule


Public Citizen, Inc. has filed an amicus brief in support of the U.S. Dept. of Labor’s Fiduciary Rule
Chamber of Commerce of the United States of America, et al. v Thomas E. Perez, Secretary of Labor and United States Department of  Labor, USDC, Northern District of Texas, Dallas Division, Civil Action No. 3:16-cv–1476– M; consolidated with 3:16-cv-1530-C and 3:16-cv-1537-N

The U.S. Department of Labor (DOL) issued a new rule – generally referred to as the fiduciary rule*– which seeks to protect workers’ saving and investments for retirement by mandating that their financial advisers act in a fiduciary capacity when providing financial advice for retirement purposes.

The U.S. Chamber of Commerce, the American Council of Life Insurers and a number of other corporate bodies have challenged DOL’s promulgation of its fiduciary rule, and have filed a lawsuit against the DOL in U.S. District Court for the Northern District of Texas. Among their claims is that the DOJ rule constitutes a content-based restriction on the commercial speech of their members and violates the First Amendment.**

On August 26, 2016, Public Citizen*** filed an amicus brief in support of the DOL’s fiduciary rule.

The Public Citizen’s brief argues that Chamber of Commerce’s First Amendment argument should be rejected because the fiduciary rule does not regulate speech; rather, it regulates the terms of a commercial or professional relationship and duties that attach to it.

DOL has indicated that:

1. The rule describes the kinds of communications that would constitute investment advice and then describes the types of relationships in which those communications would give rise to fiduciary investment advice responsibilities.

2. Covered investment advice is defined as a recommendation to a plan, plan fiduciary, plan participant and beneficiary or IRA owner for a fee or other compensation, direct or indirect, as to the advisability of buying, holding, selling or exchanging securities or other investment property, including recommendations as to the investment of securities or other property after the securities or other property are rolled over, transferred or distributed from a plan or IRA.

3. Covered investment advice also includes recommendations as to the management of securities or other investment property, including, among other things, recommendations on investment policies or strategies, portfolio composition, selection of other persons to provide investment advice or investment management services, selection of investment account arrangements (e.g., brokerage versus advisory); or recommendations with respect to rollovers, transfers, or distributions from a plan or IRA, including whether, in what amount, in what form, and to what destination such a rollover, transfer, or distribution should be made.

4. The fundamental threshold element in establishing the existence of fiduciary investment advice is whether a "recommendation" occurred. A "recommendation" is a communication that, based on its content, context, and presentation, would reasonably be viewed as a suggestion that the advice recipient engage in or refrain from taking a particular course of action. The more individually tailored the communication is to a specific advice recipient or recipients, the more likely the communication will be viewed as a recommendation. 

DOL states that it "has taken an approach to defining 'recommendation' that is consistent with and based upon the approach taken by the Financial Industry Regulatory Authority (FINRA), the independent regulatory authority of the broker-dealer industry, [which is] subject to the oversight of the Securities and Exchange Commission (SEC)."

DOL’s “fact sheet” describing its fiduciary rule is posted on the Internet at:

* The Fiduciary Rule requires retirement advisors to act as fiduciaries, putting their clients' retirement needs and interests before their own by acting in the best interest of the party whose assets they are managing. 

** In addition to Chamber of Commerce [its complaint is posted on the Internet at http://www.chamberlitigation.com/sites/default/files/cases/files/16161616/DOL%20Fiduciary%20Rule%20Complaint.pdf, two lawsuits also challenging the Fiduciary Rule have been filed, one in federal district court, Washington D.C. [The National Association for Fixed Annuities, et al, v. Thomas E. Perez et al. Case No. 16-cv-1035 RDM [the National Association of Fixed Annuities  complaint is posted on the Internet at: http://www.investmentnews.com/assets/docs/CI10555363.PDF] and the other by Market Synergy Group [Market Synergy Group v Perez, et al, USDC District of Kansas, Case 5:16-cv-04083]. The Market Synergly complaint is posted on the Internet at: https://www.bloomberglaw.com/public/desktop/document/Market_Synergy_Group_Inc_v_United_States_Department_of_Labor_et_a/1?1472484084]. 

*** Public Citizen, Inc. is a non-profit, consumer rights advocacy group. Founded by Ralph Nader in 1971, its website is at http://www.citizen.org/Page.aspx?pid=183.

Public Citizen’s amicus brief is posted on the Internet at:
  

Handbooks focusing on State and Municipal Public Personnel Law continue to be available for purchase via the links provided below:

The Discipline Book at http://thedisciplinebook.blogspot.com/

Challenging Adverse Personnel Decisions at http://nypplarchives.blogspot.com

The Disability Benefits E-book: at http://section207.blogspot.com/

Layoff, Preferred Lists at http://nylayoff.blogspot.com/

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