President Barack Obama vetoed Wednesday afternoon a resolution to kill the Department of Labor fiduciary rule, which was approved by the House in April and the Senate in May.
“This rule is critical to protecting Americans' hard-earned savings and preserving their retirement security,” Mr. Obama wrote about the Labor Department regulation raising investment advice standards for retirement accounts, in a message accompanying his veto. “The outdated regulations in place before this rulemaking did not ensure that financial advisers act in their clients' best interests when giving retirement investment advice. Instead, some firms have incentivized advisers to steer clients into products that have higher fees and lower returns — costing American families an estimated $17 billion a year.”
The House and Senate resolutions fell well short of the supermajorities required to override a veto.
Meanwhile, a federal court in Washington has set a late-summer date for action on one of the lawsuits filed last week against the DOL rule.
The U.S. District Court for the District of Columbia will hold a hearing on Aug. 25 regarding a request for a preliminary injunction from the National Association for Fixed Annuities, according to a court order signed by the presiding judge, Randolph D. Moss, on Tuesday.
NAFA's motion for a preliminary injunction also will be treated as a motion for summary judgment, according to the court order. A ruling on the merits of the case could follow quickly thereafter.
“The decision will be made by the judge after (the hearing),” Chip Anderson, NAFA executive director, wrote in an e-mail Wednesday.
The timeline is not clear for the other suit filed by nine financial and business trade groups in a federal court in Dallas.
Both suits claim that the DOL exceeded its authority in promulgating the rule in April. It would require financial advisers to act in the best interests of their clients in 401(k), individual retirement accounts and other qualified accounts.
Plaintiffs in the suits assert that the rule would significantly harm financial advisers and their clients by raising regulatory costs and legal liability for advisers and making advice more expensive to give and receive.
The DOL has made clear it will defend itself vigorously. The agency argues the rule is needed to protect retirees and workers from investment advice touting high-fee products that enrich the adviser to the detriment of clients' retirement savings.