Annuities Group, Fearing ‘Chaos,’ Urges Court to Freeze Fiduciary Rule

A financial industry trade association that lost its challenge to Obama administration regulations that confront conflicts of interest in the retirement advice market is renewing its push to stop the rules from taking effect next April.

The National Association for Fixed Annuities on Tuesday urged a Washington federal appeals court to freeze the U.S. Labor Department's fiduciary rule to let the group, represented by Bryan Cave, mount its appeal. The new rules require retirement investment advisors to put their clients' best interest before profits.

The annuities group's "emergency" request in the U.S. Court of Appeals for the D.C. Circuit asked the court to stay the April compliance date "to alleviate what can only be described as chaos" in the market for fixed annuities.

"The situation is even more unsettled due to the election of a new administration, which may consider delay or repeal of a rule purposely designed to take effect in one administration but not to become 'applicable' until the next," Bryan Cave partner Philip Bartz wrote for the National Association for Fixed Annuities, or NAFA, which advocates for insurance companies and agents who provide fixed annuities.

President-elect Donald Trump hasn't specifically addressed the fiduciary rule, but some industry observers believe his deregulatory agenda could doom the new regulations. Trump hasn't yet named his nominee for secretary of the Labor Department.

U.S. District Judge Randolph Moss in Washington, the first federal trial judge to rule on the merits of the regulations, on Nov. 4 rejected the group's claims. Moss said the Labor Department sufficiently justified the new rule, years in the making, based on new complexities in the retirement savings arena.

The annuities group failed to persuade Moss last week to pause his ruling to let the appeal play out in the D.C. Circuit. "The new rules were adopted to protect retirement investors from conflicted advice and potential losses to their retirement savings," Moss wrote. "Enjoining the rule would delay this protection."

The NAFA contends, among other things, that the Labor Department's regulations unlawfully imposed a "fiduciary" burden on "insurance salespersons who are paid strictly for selling products, rather than for providing advice."

More from the NAFA's D.C. Circuit filing:

Given this looming deadline, NAFA urges the court to preserve the status quo by staying the applicability date pending appeal. Otherwise, NAFA members will be forced to accelerate irreversible, costly, and industry-altering actions in the weeks ahead to restructure their entire distribution system, which has been in place for decades.

The annuities group's suit is one of several pending cases that challenge the fiduciary rule.

On Monday, a Kansas federal trial judge refused to enjoin the rule in a case brought by the insurer Market Synergy Group Inc. A Texas judge heard arguments this month in a consolidated series of suits in which the U.S. Chamber of Commerce is among the plaintiffs.

The suits in different federal circuits present the possibility that appeals courts could publish conflicting opinions about the fiduciary rule, setting up a pitch to the U.S. Supreme Court to resolve any conflict.

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