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Fifth Circuit Court of Appeals Strikes Down Fiduciary Rule

On March 15, 2018, the U.S. Court of Appeals for the Fifth Circuit ruled that the DOL overreached with their fiduciary rule by broadening the definition of fiduciary.

On March 15, 2018, the U.S. Court of Appeals for the Fifth Circuit ruled on Chamber of Commerce of the United States of America, et al. v. U.S. Department of Labor, et al., striking down an earlier decision by finding that the Department of Labor (DOL) overreached its designated role in creating the conflict of interest rule (fiduciary rule) and its prohibited transaction exemptions. This ruling vacates both the rule and the associated exemptions. There are a variety of scenarios that could happen as this decision moves forward, including:

  • a rehearing of the appeal by the full Circuit Court;
  • a visit to the Supreme Court;
  • the DOL scrapping the rule and starting over; or
  • The Securities and Exchange Commission stepping in and creating their own fiduciary definition.

At this stage, it is too early to tell how various parties will react to this decision, but we anticipate that there will be some further action by either the courts or the DOL. Currently, we do not expect recordkeepers and investment professionals (those most impacted by the original rule) to change their set courses. We anticipate that most will take a “wait and see” approach as to how the courts or the DOL proceed and then determine any changes they feel are necessary.

As a fiduciary to its clients, CAPTRUST will be watching the news as it unfolds and sharing any updates. Below are several articles that we have previously written on the fiduciary rule.

DOL Extends Fiduciary Rule Delay

President Acts on Fiduciary Rule

DOL Releases Long-Awaited Fiduciary Rule

For more information, please contact your CAPTRUST financial advisor at 800.216.0645.