An association of U.S. trial lawyers is sharply critical of a recent legal bid to block the U.S. Department of Labor’s (DOL) fiduciary rule.
The president of the Public Investors Arbitration Bar Association, Hugh Berkson, issued a statement criticizing a lawsuit from a collection of U.S. financial industry trade organizations aimed at blocking the DOL’s rule. The group incudes the Securities Industry and Financial Markets Association (SIFMA), the Financial Services Roundtable and the U.S. Chamber of Commerce.
“This is a last-ditch attempt by an industry to keep its undisclosed conflicts of interest and ability to continue to push inappropriate and high-cost products upon unsuspecting investors. Lining the pockets of brokers instead of promoting the interests of retirement savers promotes no good public interest,” Berkson said in the statement.
The industry suit alleges that the DOL is overstepping its jurisdiction with the fiduciary rule, which requires advisors to adhere to a fiduciary standard when providing retirement advice and thereby infringes on the turf of securities regulators. It also argues that the rule will reduce investor choice and, ultimately, harm the economy.
U.S. groups challenge fiduciary rule
“While the plaintiffs in the latest suit feign concern that the DOL rule somehow will deprive investors of the advice and options they need, the actual facts indicate otherwise,” Berkson stated. “In truth, an academic study has demonstrated that there is no statistically significant difference in investors’ access to financial advice, options for investments or cost of compliance for retirement investors in states that already maintain a strong fiduciary duty requirement and states that maintain no fiduciary duty requirement.”
Berkson also stressed that the DOL rule was finalized after extensive public consultation. “We know where the public interest lies in this matter,” he said. “The fact that it does not coincide with the commission-driven mentality of the brokerage industry is nowhere near a sufficient reason for striking down the eminently reasonable and fair DOL rule.”
The DOL rule is scheduled to take effect in the spring of 2017. In the meantime, the Securities and Exchange Commission continues to work on its own common fiduciary standard for brokers and advisers.
In Canada, securities regulators are currently consulting about possibly introducing their own statutory “best interest” standard in certain provinces.
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