DOL 1, Critics of the New Fiduciary Regulations 0: Comments on NAFA v. Perez
Well now, I wrote a few substantial posts on the multiple lawsuits challenging the Department of Labor’s new regulations governing fiduciary status at the time they were filed, a couple of which you can find here and here. One of my key points was that it is a mistake to get lost in the meta story made in the complaints in those actions, which are effectively – using the term in its broadest form – political documents making the case that the regulatory changes are just plain bad. In a way, the complaints in those actions read almost like old fashioned political pamphlets with regard to the big picture criticisms made in them, while having technical legal arguments buried beneath. That is not a criticism, not to me anyway. Hitting all of those notes in the same complaint is a tough job, and it was done well. But as I suggested in this post, if you looked past the polemics and focused on the administrative law challenges to the promulgation of the rules that are the actual technical heart of the complaints filed against the Department, it was right to be skeptical of the complaints and the claims against the Department seeking to set aside the new regulations. The scope of a challenge to this type of administrative and regulatory action is highly specific and its grounds narrow; skepticism about the various plaintiffs’ abilities to prove their claims was warranted, given the massive effort by the Department in promulgating the regulations and the history of what occurred when they did so.
That skepticism is borne out in the first substantive ruling by one of the courts with a challenge to the Department’s new regulations pending before it. The United States District Court for the District of Columbia has roundly rejected the plaintiff’s arguments in that case, firmly upholding the Department’s actions. The decision is 92 pages long and I doubt that many people spent their weekend reading it, and while I did, I don’t want to spend my whole morning summarizing it. And why should I? Nevin Adams at NAPA has done a great job of that already, right here in this story.
One of the things I like about his summary is that he really drives home the extent to which the court found that the Department acted within its regulatory authority and power. That, as I noted above, is the real central point in all of the lawsuits filed over the new fiduciary regulation, as opposed to the question of whether the financial and insurance industries should be put in the position of having to comply with the accompanying changes to industry practice, which is more properly a question for the political – and not the judicial – process.