Today the Federation of Americans for Consumer Choice (FACC), joined by a number of independent insurance agents and agencies, sued the US Department of Labor challenging its interpretation of who is considered a fiduciary. The lawsuit was filed in Dallas federal court within the Fifth Circuit where the appellate court three years ago struck down the Labor Department’s prior fiduciary rule.
The Labor Department’s new rule, which takes full effect this week, broadens the agency interpretation of who is considered a fiduciary which the lawsuit contends is contrary to an earlier decision of the Fifth Circuit Court of Appeals. The new rule is the latest iteration of a decade old effort by the government to turn more financial professionals, including insurance agents, into fiduciaries subjecting them to more onerous regulatory requirements.
The lawsuit asserts the Labor Department’s latest rule “carries forward the core problem the Fifth Circuit identified in vacating the Fiduciary Rule the first time,” adding that “pouring the same old wine into a new bottle does not change the result.”
FACC, a relatively new trade group representing independent life insurance agents and agencies selling annuities and other insurance products, contends the Labor Department rule will harm average consumers even though promoted as increasing consumer protection. Kim O’Brien, CEO of the trade group, says “the final interpretation adopted by the Labor Department places an unfair regulatory burden upon independent insurance agents who serve Middle America thereby limiting access by lower and middle income Americans to important guaranteed retirement products as well as retirement advice more generally.” O’Brien points out that insurance agents are heavily regulated by state insurance departments and expresses concern the Labor Department rule creates a costly and unnecessary new layer of regulation.
The lawsuit is being brought on behalf of FACC by attorneys Andy Jubinsky and Don Colleluori of the Figari & Davenport law firm who are prominent Dallas based commercial litigators. According to Jubinsky, “we think it is helpful to everyone, including the Labor Department, that a federal court review whether these new rules comport with the Fifth Circuit decision handed down a few years ago because otherwise a cloud will hang over these rules until there is such a legal challenge.”
Several individual agents and agencies based in Texas joined the lawsuit as plaintiffs including Eric Couch who runs ProVision Brokerage in Flower Mound located just north of Dallas-Fort Worth. “We obviously work hard to provide quality products and services to our clients but we worry that yet another layer of regulation could impair our ability to stay independent and offer the widest range of products that truly benefit our clientele.”
A judge will likely be assigned to the case later this week.