Life insurance industry advocates are now looking to a trio of state and federal regulators to develop a "harmonious" fiduciary rule after a key appellate court vacated the original rule championed by the U.S. Department of Labor.
Heads of several life insurance industry lobby groups expressed their optimism that the SEC, the National Association of Insurance Commissioners and the Financial Industry Regulatory Authority would create a new standard in future rulemaking to avoid consumer confusion and competing standards among regulators.
"I believe there is now an effort for this harmonized approach so that all of these principles and these [regulators] are communicating and understanding where they are going in this proposal," Dick Kempthorne, president and CEO of the American Council of Life Insurers, said on a conference call with reporters.
Kempthorne and other industry members on the call said they were "very encouraged" in working with all the regulators to develop a "consistent" standard. Their "ongoing" discussions with SEC Chairman Jay Clayton have been productive, they said.
A Department of Labor spokesperson wrote in a statement March 16 that "pending further review, the Department will not be enforcing the 2016 fiduciary rule."
The rule was first proposed in February 2015 by former President Barack Obama, who directed Labor to develop standards to oversee retirement accounts. Labor's proposed rule classified financial and retirement advisers as "fiduciaries," imposing a set of rules that legally required them to offer clients the best advice and products.
In February 2017, President Donald Trump asked Labor Secretary Alex Acosta to review the rule. In a surprise to the industry, Acosta approved the rule and laid out a roadmap for implementation.
The lawsuit before the appellate court was an appeal to a decision by a lower court that approved the rule. By vacating the rule, the court declared it null and void, applicable immediately nationwide, David Ogden, a lawyer representing the lobby groups in the case said on the call.
"The decision is a complete victory for the plaintiffs in a comprehensive opinion," Odgen said.
Without the rule in place, life insurers and broker/dealers would be governed by existing law until a new rule is rolled out by regulators, Ogden said.
That would put the onus on Labor to either accept the ruling or appeal to the Supreme Court for a final decision.
"We would be prepared to continue to assert that reasoning that the [appellate court] has advanced," Ogden said, if the department seeks a higher ruling. "It's our hope that the department looks very hard at ... the reasoning of the court and determines whether they think it's a useful thing to take to the Supreme Court."
