Eugene Scalia, a partner with Gibson Dunn who represents the nine plaintiffs suing the Labor Department over its fiduciary rule, told the U.S. Court of Appeals for the 5th Circuit on Friday that Massachusetts' action Thursday against Scottrade for allegedly violating the fiduciary rule's Impartial Conduct Standards is "without merit," and will spark "private plaintiffs …to exploit the rule to concoct state law claims."
"Although the claims are pleaded under state law, they are premised on Scottrade's alleged violation of the U.S. Department of Labor's fiduciary rule and related company policies," Scalia wrote.
The charge, levied by Massachusetts Securities Regulator William Galvin, "which seeks censure, fines, and disgorgement, among other penalties — vividly illustrates the urgent need to vacate the rule," Scalia told the court.
Massachusetts's "attempt to use the fiduciary rule in this manner lacks merit," Scalia said, and "it confirms Appellants' concern that the portions of the rule that took effect on June 9, 2017 will continue to impose extensive burdens and costs on Appellants' members, even while other aspects of the Rule have been postponed."
Among the nine plaintiffs that Scalia represents are the Securities Industry and Financial Markets Association, the Financial Services Institute and the U.S. Chamber of Commerce.
Scalia said that the Massachusetts' complaint asserts that "Scottrade has failed to act in good faith to comply with the fiduciary rule,'" and argues that "this gives rise to multiple violations of state law."
