Want to Know Everything About the Litigation Over the New Fiduciary Regulations Without Having to Study?
The Department of Labor’s promulgation of its new fiduciary duty and best interest contract exemption regulations is, to this current lawyer and once upon a time public administration student, a case study in administrative law and regulatory action. Rightly or wrongly, whether you substantively agree or disagree with the regulatory initiative, and without regard to whether or not the promulgation is legal, the history of the promulgation provides enough material to teach multiple classes in multiple disciplines. The political battle over the regulatory and accompanying policy shift could sustain a graduate level seminar on public policy for an entire semester; the process of enacting the regulations is a case study in the administrative process; and the legal challenges to their enactment touch on effectively every key aspect of administrative law, statutory interpretation, and regulatory action.
As you can tell from that wind-up, there is a tremendous amount to say about this topic. At this point, we are past the political and regulatory aspects of the endeavor (for now anyway, at least until the next administration), and are onto the legal questions of the validity of the regulations. It took the Department of Labor 105 very well written pages to address those points in this brief filed on July 8th in the District Court for the District of Columbia, and even I have only skimmed it. I question whether anyone not directly involved with the case, or paid to follow it as part of their job, will ever read it any closer than that (although I might, but only if I bring it to the beach as my beach reading).
For those of you who want to understand the Department’s position without skipping the latest paperback thriller while on vacation, I highly recommend this detailed review of the Department’s arguments by Rebecca Moore at Planadviser. Briefly, and in only cursory fashion, I will note that I am fond of the Department of Labor’s argument that they are not boxed into the prior definition of fiduciary and precluded by the statute or congressional intent from changing it, but I will also note that I think the weakest part of their case is over the question of their authority to assert jurisdiction in this manner over IRAs. That and three dollars and a quarter will get you a cup of the daily drip at George Howell Coffee at the Godfrey Hotel nearby.
I would also note a much bigger picture issue, however. If you have only followed the dispute over this regulatory change from a distance, and have wondered about the reason for so much sound and fury, reading the Planadviser story should answer that question for you. You see from the story how much of the world is being upended by the initiative, and that, from the Department’s perspective, the point is to bring the relevant regulatory regime into balance with the realities of the modern financial world. That is quite an undertaking, and cannot help but overturn a lot of apple carts. In America today, if you overturn a lot of apple carts by government action, you get the bees buzzing, to mix my metaphors, in this case in the form of extensive litigation.