The Battle Continues Over Fiduciary Rules For Financial Advisors
The claimants picked a good venue for their litigation. The U.S. District Court for the Northern District of Texas is notably sympathetic to the business community. They also have uber-employment lawyer Eugene Scalia arguing their case. Scalia, the son of former Supreme Court Justice Antonin Scalia, has had plenty of success in litigation against rules issued by federal administrative agencies.
Scalia, a lawyer with Gibson Dunn & Crutcher, will have a tough time arguing that the DOL doesn’t have the authority to issue rules on ERISA accounts such as 401(k) plans, though he may have more grounds to argue that the application of the rule to IRAs is a new and undesirable initiative by the department. It will also be hard to argue that the DOL acted arbitrarily, given the extensive hearings, comment periods and changes to the rule since it was first proposed in 2010.
“I wouldn’t say the rule is a fait accompli, but I think the odds favor it taking effect on schedule,” said Blaine Aikin, executive chairman of consultant fi360 and a noted expert on fiduciary issues. Even if the Texas court does delay implementation of the rule, Aikin believes the momentum for change in the advisory industry can’t be derailed.
“Firms are already doing a lot to prepare for this,” he said. “If the rule is blocked, it will be difficult for firms to change course.”