Here are the eight counts that form the basis for the
complaint, which asks the U.S. District Court for the Northern District of
Texas to immediately vacate the rule:
* Count One: The
Labor Department has “improperly exceeded” its authority in violation of the
Employee Retirement Income Security Act (ERISA), the Internal Revenue Code and
the Administrative Procedure Act. ERISA grants the DOL authority only over covered employee
benefit plans, not over individual retirement accounts, or IRAs, when “sold to
individual savers,” the plaintiffs allege.
* Count Two: The
rule violates the Administrative Procedure Act because it is “arbitrary,
capricious, and irreconcilable” with ERISA and the Internal Revenue Code. The rule is so broad that it includes activity “long been
understood to be sales-related and not fiduciary,” the plaintiffs argue.
* Count Three: The
DOL “unlawfully created a private right of action.”
The Best Interest Contract (BIC) Exemption and the Principal
Transactions Exemption (PTE), which allow advisors to collect third-party fees
and commissions, violates the Administrative Procedures Act by enabling IRA
participants and other non-ERISA plans to sue financial institutions and
advisors for “breach of standards” imposed by the DOL.
* Count Four: The
DOL failed to provide adequate notice and to consider and respond sufficiently
to the thousands of comments it received last year. Citing just one example, the plaintiffs allege that DOL
regulators failed to review its Regulatory Impact Analysis even after dozens of
commentators informed the department of the analysis’ defects.
* Count Five: The
Federal Arbitration Act prohibits the Best Interest Contract (BIC) and
Principal Transaction Exemptions’ (PTE) Regulation of class action waivers in
arbitration agreements. The DOL does not have the authority to override the
Federal Arbitration Act’s protections of “enforceability of arbitration
agreements,” without Congressional authority, plaintiffs argue. There is
nothing in ERISA that contains such an override, the lawsuit says.
* Count Six:
Regulation of fixed indexed annuities and group variable annuities through the
BIC exemption is “arbitrary, capricious, barred by the Dodd-Frank Act, and was
not subject to proper notice and comment.” By placing variable annuities and
fixed indexed annuities under the BIC, the department is looking to regulate
products that Congress removed from federal regulation when it prohibited the
SEC from regulating FIAs if the products met state standards, the lawsuit
claims.
* Count Seven: DOL
regulators “arbitrarily and capriciously assessed the rule’s benefits,
consequences, and costs.” DOL analysis of the rule’s benefits – saving
retirement savers up to $4 billion a year – would outweigh the costs are
“thoroughly flawed,” as the analysis ignores and underestimates the costs of
class action lawsuits, lost access to retirement help, the plaintiffs allege.
* Count Eight: The
BIC violates the free speech guarantees in the First Amendment because it
“impermissibly burdens speech.” The rule “improperly abridges” the right of
advisors to engage in truthful, non-misleading speech related to their products
and services since the rule sets parameters as to what advisors may or may not
discuss with their clients.
Plaintiffs in the dispute include the U.S. Chamber of
Commerce, the Financial Services Institute, the Financial Services Roundtable,
the Greater Irving-Las Colinas Chamber of Commerce, Humble Area Chamber of
Commerce, the Insured Retirement Institute, the Lubbock Chamber of Commerce,
the Securities Industry and Financial Market Association and the Texas
Association of Business.
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