Watch your back as court dismantles protection rule

Personal finance


On March 15, the 5th Circuit ruled that the Labor Department exceeded its authority by drafting the fiduciary rule, and vacated the regulation.

The department had until April 30 to appeal the decision, but failed to do so. Meanwhile, the court is expected to issue its final ruling as soon as this week.

Though major brokerage firms have taken steps to comply with parts of the fiduciary rule — for instance, they moved away from commission-based compensation and toward asset-based fees — the court injected more uncertainty on the responsibilities advisors and their firms face.

“There is significant confusion on the 5th Circuit decision about whether professionals servicing retirement accounts are fiduciaries and what duties they owe their clients,” said Hauptman.

The Labor Department sought to give firms some guidance on their duties, announcing that it would not pursue claims against advisors who make a good faith effort to comply with the “impartial conduct standard,” a portion of the fiduciary rule that’s currently in effect.

That standard requires advisors to charge no more than reasonable compensation and avoid misleading statements.

The ultimate fate of the regulation is still unclear.

President Donald Trump had ordered the Labor Department to review the rule and prepare an updated economic and legal analysis. Meanwhile, the Securities and Exchange Commission and other regulators continue to hammer away at their own fiduciary regulation.



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