The U.S. Court of Appeals for the District of Columbia Circuit rejected an appeal today for a preliminary injunction stopping the Department of Labor fiduciary rule.
The National Association for Fixed Annuities filed the appeal after a federal District of Columbia District Court judge ruled against a similar request last month.
“Appellant has not satisfied the stringent requirements for an injunction pending appeal,” the three-judge panel wrote in a one-page decision today.
NAFA could next file for an expedited appeal, but the association has said that decision would not come in time. The DOL fiduciary rule is slated to begin taking effect April 10, 2017.
NAFA, represented by Bryan Cave law firm in Washington, D.C., said that maintaining the status quo of the annuity distribution system is important because the preparation to meet the April 10 applicability deadline would inflict the harm that the association’s lawsuit is trying to prevent.
The DOL’s rule requires insurance agents and advisors to hold to a fiduciary standard when selling fixed indexed annuities (FIAs) involving retirement money, while still upholding the suitability standard. Advisors would be required to demonstrate that they had the clients’ best interest in the sale and that their compensation was “reasonable,” which was not defined in the rule.
The rule also would require a financial institution to guarantee that the standard was upheld. The financial institution could be held accountable for any wrongdoing in a lawsuit. Insurance agents and independent marketing organizations (IMOs), the traditional FIA wholesaler, were not considered financial institutions in the rule.
Many insurance companies, which were named as financial institutions, said they were not willing to assume the liability with independent insurance agents.
On Nov. 4, Judge Randolph D. Moss of the federal District of Columbia circuit denied NAFA’s request for a preliminary injunction and granted a summary judgment to the DOL.
The judge ruled that NAFA did not meet the standard for an injunction, namely, proving that it can win its case on merit. Appellate courts typically defer to the circuit judge’s decision and rarely issue an emergency injunction.
Three other cases are in the works. The second lawsuit, filed by Market Synergy Group, was heard Sept. 21 in a U.S. District Court in Kansas. The third of the original lawsuits was heard Nov. 17 in a Dallas federal court, a consolidated case led by the U.S. Chamber of Commerce.
All three lawsuits make similar claims that the DOL was “arbitrary and capricious” and overstepped its authority with the fiduciary rule.
A fourth case – Thrivent Financial vs. Department of Labor – takes a different route in challenging the DOL’s class-action provision. It will be heard March 2 in St. Paul, Minn.
InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at firstname.lastname@example.org.
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