See Credit Details Below
The Fifth Circuit's decision in Chamber of Commerce v. US Department of Labor represents a rebuke of the Department of Labor’s (the "DOL") amended and controversial "investment advice" regulation under ERISA's fiduciary rules. Depending on the end game here, this development not only could end the approximately eight-year process that began with the DOL’s initial proposal in 2010, but also could rank as being among the most significant developments in the ERISA area since the statute's enactment in 1974.
The DOL’s amended regulation was preceded by the long-standing 1975 regulation that had defined investment advice with a five-part test. For example, a person would not be regarded as an investment advice fiduciary unless investment advice was given regularly and would not be regarded as an “investment advice” fiduciary unless there was a mutual agreement that the advice was a primary basis for the recipient's decision-making. The DOL identified a number of reasons for the changes, and the long and winding road for the regulation's revision began in earnest with the changeover to the Obama administration and related changes in key DOL personnel.
Eventually, amidst much controversy, and after an initial proposal was withdrawn following a firestorm of objection, an amended regulation (together with various new and amended exemptions) was finalized, again after significant comment and controversy, and became applicable on June 9, 2017. Many were surprised at this result, particularly after the Trump election and indications from the new administration about procedural and substantive concerns, including a Presidential Memorandum issued by the administration in February 2017.
Now, last month on March 15, 2018, the Fifth Circuit enters the fray with the Chamber of Commerce decision by determining that the regulation is unreasonable and is arbitrary and capricious, and by vacating the regulation (and the related exemptions) in its entirety. In light of that decision, the parties to another case, National Association for Fixed Annuities v. US Department of Labor, agreed that the appeal to the DC Circuit in that case, where the district court below had upheld the regulation, would be dropped, thereby further increasing the likelihood that the key ongoing judicial activity regarding the regulation would center on the Chamber of Commerce case (although there are other pending cases as well).
So where do we go from here? Will the DOL proceed in support of the regulation? And, if the DOL chooses not to appeal or otherwise contest the Fifth Circuit's opinion, is it simply "game over" for the regulation, regardless of what may happen in other courts?
These and other questions will be addressed by our panelists. The panelists will also discuss pending activity by the Securities and Exchange Commission, initiatives at the state level and at organizations like the National Association of Insurance Commissioners, and how the market may react if the regulation does not survive.
Please join attorneys who have been at the forefront of the analysis surrounding the fiduciary regulation, and the lead attorney who argued the NAFA case referred to above. The panel will consist of Philip D. Bartz of Bryan Cave LLP, who litigated the NAFA case, and Steven W. Rabitz of Stroock & Stroock & Lavan LLP. The discussion will be moderated by Andrew L. Oringer of Dechert LLP, who has hosted our series of Hot Topic Briefings on various ERISA cases as they are decided.
Topics to be addressed will include:
- How did we get to where we are? (background)
- What happens now? (procedurally)
- Where do we go from here? (both in terms of the fate of the rule and the effect on the market)