March 21, 2018

5th Circuit Court Vacates DOL Rule

On March 15, 2018, the Fifth Circuit Court of Appeals ruled via split decision to “vacate” the well-publicized DOL fiduciary rule. This decision does not come as much surprise. It has long been rumored that the DOL rule was destined for failure after President Trump ordered a formal review in March 2017. Speculation by industry watchers is that the next step for the DOL rule could be the U.S. Supreme Court.

While this decision is limited in scope, it creates an opportunity for the Securities and Exchange Commission (“SEC”) to take the lead on a uniform fiduciary standard for both RIAs and broker-dealers. The SEC is the more natural choice for marrying the fiduciary standard across both RIAs and broker-dealers.

We expect the SEC to prioritize a new fiduciary rule proposal. Although the timing is uncertain, we expect to learn more prior to 2019.

What does this mean for you?

With or without the DOL, you still have a fiduciary responsibility to act in the best interest of your clients. You may not have to go to the extent of best interest contracts. However, “Know Your Clients” requirements are never going away and the regulators will always want documentation of how you operate as a fiduciary. It may still make sense to adopt some of the documentation standards of the DOL’s “Level Fee Fiduciary” when making rollover recommendations.


Brian Young
Brendan Furey


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