The U.S. Court of Appeals for the Fifth Circuit ruled to vacate the DOL Fiduciary Rule. This ruling contradicts the ruling of the Tenth Circuit, which determined that the “DOL’s fiduciary rulemaking has played out properly and within the confines of the regulator’s broad existing authority.” The state of the rule at this juncture is uncertain, in light of the conflicting rulings. Furthermore, there is much confusion concerning whether or not an appeal to the Supreme Court should occur. Financial institutions are left to make a decision of how to react, which becomes more complex if a firm’s operations are located in the Fifth Circuit. It is also unknown as to whether or not state regulators will proceed with new enforcement actions or establish new rules in response to this new uncertainty.
In response to this situation the SEC has announced that it will hold a formal hearing to discuss establishment of a strong system to “prevent, disclose and address brokers’ and advisers’ potential conflicts of interest”, thereby examining the fiduciary rule. It has been thought that the SEC would likely play a direct role in any successful fiduciary rule expansion, on the premise that the SEC holds broader authority than the DOL to “police the behavior of financial advisers and broker/dealers, as the DOL’s jurisdiction is linked to ERISA.
www.planadviser.com; March 16, 2018; April 12, 2018.