Federal Appeals Court Rejects NAFA Request to Halt Fiduciary Rule
December 20, 2016 by Frank Klimko
WASHINGTON – A federal appeals court has denied a request by the National Association for Fixed Annuities for a preliminary injunction to stop implementation of the U.S. Department of Labor’s new fiduciary rule, upholding a lower court ruling.
The U.S. Court of Appeals for the District of Columbia Circuit refused to immediately halt the rule, which has an implementation deadline of April 10.
“It is ordered that the emergency motion for an injunction pending appeal be denied,” the court said. “Appellant has not satisfied the stringent requirements for an injunction pending appeal.”
The one-page order — by Judges Sri Srinivasan, David Tatel and Karen Henderson — did not offer any detail beyond the ruling. The ruling upholds a finding by Judge Randolph Moss, of the U.S. District Court for the District of Columbia, that the DOL did not overstep its authority in tightening regulations for retirement advice (Best’s News Service, Nov. 7, 2016).
In a statement, NAFA said it considering further appeals.
“NAFA disagrees and is deeply disappointed in the D.C. Circuit’s order denying NAFA’s request for an injunction pending appeal,” the statement said. “The court gave no real rationale for its decision. We are exploring all opportunities for further judicial review and look forward to a full briefing on the merits.
“We also remain very hopeful the new administration will repeal this anti-consumer regulation, and we continue to work with our contacts on the Hill to effect that outcome,” the statement said.
Attorneys for NAFA had argued the rule would upend the retirement advice industry and have disastrous consequences for independent marketing organizations and insurance agents/brokers involved in the sale of fixed annuities. However, Moss ruled the DOL did not overstep its authority when it required fiduciaries using the Best Interest Contract exemption to agree to be sued for breach of contract related to the best interest standards created in the rule.
The NAFA case is one of four lawsuits opposing the DOL rule. Last month Judge Daniel D. Crabtree, of the U.S. District Court for the District of Kansas, refused to issue a preliminary injunction stopping the rule sought by Market Synergy, an insurance agency licensed in Kansas.
On Nov. 17 a federal judge in Dallas heard a consolidated case, which included complaints by the American Council of Life Insurers and the National Association of Insurance and Financial Advisors.
The final lawsuit, by financial service provider Thrivent Financial for Lutherans, will be heard by Judge Susan Richard Nelson, of the U.S. District Court for the District of Minnesota, on March 3 (Best’s News Service, Oct. 28, 2016).
(By Frank Klimko, Washington correspondent, BestWeek: Frank.Klimko@ambest.com)