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Fifth Circuit Court Vacates DOL’s Fiduciary Rule

On March 15, 2018, the Fifth Circuit Court of Appeals vacated the U.S. Department of Labor’s (DOL) fiduciary rule for retirement account advisers. The Court found that the agency had overstepped its authority and that the Obama-era rule’s revised definition of “fiduciary” was unreasonable.

The rule was challenged in a lawsuit by the U.S. Chamber of Commerce and other business groups. This rule was believed to create additional compliance burdens for businesses, including credit unions. CUNA and NAFCU have previously raised concerns about compliance challenges under the rule.

The rule imposes a fiduciary standard of care on broker-dealers and investment advisers if they offered investment advice to consumers investing in a retirement plan. While Credit Unions are prohibited from offering investment advice, the DOL rule would impact advisory services provided through vendors and/or credit union service organizations.

The ruling by the Fifth Circuit Court is at odds with an earlier ruling by the 10th Circuit Court of Appeals. The 11th Circuit Court of Appeals which governs Alabama, Georgia and Florida has not ruled on this issue. Many believe this matter will ultimately be resolved by the Supreme Court, if Congress does not intervene. Currently the DOL has delayed implementation of three fiduciary rule exemption changes from January 1, 2018, to July 1, 2019.

Should you have questions about this update, feel free to contact an attorney at Sorenson Van Leuven. While these issues are outside our area of expertise, we can help connect you with attorneys able to give you guidance if your Credit Union is concerned with the impact of the rule and these court rulings.