Scalia: DOL Fiduciary Rule Will Be Obliterated

Do you see Labor asking for a rehearing by the 5th Circuit? "I'd be very surprised to see Labor seek rehearing. This was an extraordinarily controversial rule by the prior administration. The [fiduciary] rule is a leading example of the kind of regulatory overreach that the White House counsel and other White House officials have criticized."

The 5^th Circuit "judges in the majority in the case are very well-regarded, and have a lot of admirers at the Justice Department." Also,"from a policy perspective, one of the challenges in any new presidential administration is moving past your predecessor's priorities. Having the Obama-era fiduciary rule vacated is an opportunity to move past the last administration's priorities."

The 5^th Circuit ruling isn't effective until May 7. Correct? "Unless rehearing is sought by the Labor Department, the mandate [to vacate the rule] will issue on May 7."

That includes vacating the entire rule, correct, including the Impartial Conduct Standards that took effect on June 9, 2017? "Important elements of the rule took effect in 2017; once the 5th Circuit ruling becomes effective, no part of [Labor's fiduciary] rule will be in effect."

In terms of next steps? "This [fiduciary issue] is a matter that ought to be addressed by the SEC; Dodd-Frank made clear that the question of a uniform fiduciary standard is under the SEC's purview. Eyes now turn to the SEC, and Labor can go back to focusing on the areas that Congress put under its responsibility. Likewise, state regulators have always been the primary regulators of insurance products, another aspect in which this [fiduciary] rule had the Labor Department" straying beyond its responsibilities.

Will this case eventually land at the Supreme Court? "Given where things stand now, I'd be very surprised to see this [case] reach the Supreme Court. The court's decision is right in the mainstream of Supreme Court jurisprudence regarding the review of agency rules. I don't see the 5th Circuit decision as one that would surprise or attract the attention of the Supreme Court."

Does the 5^th Circuit decision impact fiduciary actions being taken in the states? "I think the place to focus on now is the SEC. Congress has identified the SEC as the proper regulator for broker-dealers. The 5^th Circuit decision does not prevent states" from taking fiduciary-related measures.

(Related: Lawyer Fighting DOL Rule Blasts Scottrade Fiduciary Charges)

Former Labor Secretary Tom Perez and Assistant Secretary of Labor Phyllis Borzi maintained that the rule was designed to update the 40-year-old Employee Retirement Income Security Act to reflect changes in the retirement planning landscape. "First of all, this rulemaking was not about ERISA. It was far and away mainly about IRAs and the tax code. What you saw [with the fiduciary rule] was a statement by Assistant Secretary Borzi and others that basically the law that Congress enacted wasn't good enough. That kind of assessment is not the Labor Department's job, yet they acted as if it was proper for them to step in [and rectify] what they saw as errors" by Congress.

— Check out Looking for Leniency From FINRA? Don't Count on Mitigation on ThinkAdvisor.