Johnson Hobbs Squires LLP Menu Contact
Johnson Hobbs Squires
Request a Free Consultation 254-633-3011
Experience. Leadership. Results.

Court Overturns Obama Rule Protecting Investors Saving for Retirement

16723-protect retirement.jpgA U.S. court of appeals has struck down a Department of Labor (DOL) rule that was intended to prevent financial advisers from steering their clients to bad retirement investments.

Prompted by concern that many financial advisors have a sales incentive to recommend to their clients retirement investments with high fees and low returns because the advisors get higher commissions or other incentives, President Obama directed the DOL to draw up rules that require financial advisors to act like fiduciaries in February 2015. A fiduciary must provide the highest standard of care under the law.

Several industry trade groups sued to overturn the so-called fiduciary rule, arguing that the DOL overstepped its authority in enacting the regulation. A federal court judge initially upheld the rule, but in March 2018, the U.S. Court of Appeals for the Fifth Circuit overturned it. According to the court, the DOL did not have the authority to enact the rule. The court criticized the DOL for overstepping its boundaries into an area that should be handled by the Securities and Exchange Commission (SEC). The Trump administration, which delayed the fiduciary rule at first but eventually allowed it to go into effect, has not appealed the decision.

While the fiduciary rule might be dead for now, the SEC has proposed new regulations that would require investment brokers to act in the best interest of their client when recommending an investment. It also requires brokers to disclose or mitigate conflicts of interest. The proposed regulations do not, however, define what "best interest" means, which may cause confusion for brokers and consumers. There is a long road ahead before these regulations are approved. The SEC is accepting comments on the regulations until August 7, 2018.

Even if the SEC's regulations are approved, they do not solve every problem. Consumers should always use caution when selecting a financial adviser. In particular, consumers should check their financial adviser's experience and credentials and beware of phony credentials.

To read the proposed SEC rule, click here.

To read an article about the proposed rule from Bloomberg, click here.

No Comments

Leave a comment
Comment Information

An Efficient Full-Service Law Firm

For a free initial consultation about your legal matter, contact our team of attorneys at 254-633-3011 or by filling out this short contact form.

Bold labels are required.

Contact Information
disclaimer.

The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form.

close

Privacy Policy