A trade group of insurance agents and agencies has filed a lawsuit against the Department of Labor (DOL), to challenge the federal agency’s interpretation of who is required to act as fiduciaries for customers.
The lawsuit was filed by the Federation of Americans for Consumer Choice (FACC), together with several independent insurance agencies and agents.
The lawsuit looks to overturn a federal rule that was only recently enforced by the DOL, which requires every financial professional (such as an insurance agent) who invests client money that is rolled over from a retirement plan or IRA to act as a fiduciary. It also mandates that financial professionals document and disclose why the rollover is in the client’s best interest.
In addition to adding fiduciary duties to financial professionals, the rule also compels professionals accepting commission-based compensation to meet certain requirements to mitigate conflicts of interest, and states that financial company CEOs must produce an annual report that details how they have implemented the said rule, as well as how they supervised sales professionals and advisors.
One of the key issues regarding the rule raised by the FACC in its lawsuit is that independent agents work with multiple different insurance companies, so they do not have such supervisory relationships. FACC also called out the DOL for releasing an agenda in 2021 to possibly revise or replace the rule, which led to confusion and potentially redundant compliance vendor bills for multiple industries.
Financial Advisor Magazine reported that the complaint was filed in federal court in the Fifth Circuit in Dallas.