The Public Investors Arbitration Bar Association (PIABA), a U.S. investor advocacy group, on Tuesday called on the courts to reject a legal challenge by the U.S. financial industry to the U.S. Department of Labor’s (DOL) new rule establishing a fiduciary duty for retirement advice.

PIABA filed an amicus brief filing with the U.S. District Court for the District of Columba urging the court not to block the DOL rule, and opposing an injunction against the rule that is being sought by the National Association for Fixed Annuities (NAFA).

PIABA argues that the DOL has the jurisdiction to make the rule addressing inherent conflicts of interest in the financial industry. “Conflicted advice harms investors every day. PIABA members have witnessed firsthand the devastating effects of the advice, seeing retirees forced to return to work making little more than minimum wage, and even dealing with clients attempting suicide after having lost their life savings to conflicted investment advice,” PIABA says in its brief.

“Our brief explains how investors are harmed by conflicted advice under the current standards governing investment professionals, and will continue to be harmed if the DOL’s Conflict of Interest Rule is not permitted to be fully enacted and the status quo is maintained,” says Hugh Berkson, president of the PIABA, in a statement.

“The DOL rule forces anyone who gives advice to retirement investors to act in the investors’ best interest. As it stands, without this rule, many advisors do not have to give advice that is in the clients’ best interest. This costs investors billions of dollars every year,” Berkson adds. “It is our hope that the court will see fit to reject NAFA’s last-ditch attempt to stop the implementation of this pro-investor rule. “

Regulators in Canada are also considering the introduction of a possible “best interests” duty on financial advisors. The Canadian Securities Administrators (CSA) published a consultation paper on the issue in the spring. The comment period on that consultation closes Aug. 26.

CSA proposes best interest standard

As in the U.S., the financial industry in Canada generally opposes the introduction of this sort of duty, whereas investor advocates support it.

Regulation: It’s still far from over

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