Nine financial industry groups filed a lawsuit Wednesday against the Department of Labor over a recently released fiduciary rule that places a number of new regulations on retirement advisers.
The list of plaintiffs is hefty: The Chamber of Commerce of the United States of America; Financial Services Institute Inc., Financial Services Roundtable; Insured Retirement Institute, Securities Industry and Financial Markets Association, Great Irving-Las Colinas Chamber of Commerce, Humble Area Chamber of Commerce DBA Lake Houston Area Chamber of Commerce, Lubbock Chamber of Commerce and Texas Association of Business.
They allege the DOL is overstepping its authority and undermining the best interest of those saving for retirement.
Critics of the rule – which is aimed at preventing conflicts of interest – say it increases costs and creates additional red tape, alienating low-and-middle income Americans from seeking financial guidance. The groups said the agency was overreaching into what should be the Securities and Exchange Commission’s territory as it was given the authority to oversee the issue in the Dodd-Frank Act.
“This rule will limit consumer choice by forcing those who need retirement investment assistance to obtain it only by entering a fiduciary relationship, and bearing the accompanying costs, or to forgo it entirely,” the complaint reads. “Studies show that a similar regulation adopted in the United Kingdom has had a real and negative impact on lower-income individuals’ ability to obtain much-needed retirement assistance — resulting in what one of the principal U.K. financial regulators has called an ‘advice gap’ for the less affluent.”
The 1,023-page rule redefines who is held to a fiduciary standard, a legal obligation to act in a clients best interest, but opponents fear it will lead to advisers pushing risk-averse investments to prevent lawsuits and create an onslaught of extra paperwork.
“The rule will shackle Main Street financial advisers with extensive new requirements and constant liability, forcing them to limit the options and guidance they provide to retirement savers,” the groups said in a statement Thursday. “Advisors servicing small business plans will similarly be left with no choice but to limit or stop servicing the retirement plans offered by those job-creators, significantly reducing the retirement savings options available to their millions of employees.”
GOP lawmakers have dubbed the regulation “Obamacare for your IRA” and both chambers of Congress have passed legislation to block its implementation – which President Barack Obama vowed to veto.
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