DOL Files to Pause Appeal of Fiduciary Rule

Under the previous administration, the Department of Labor had filed notices of appeal in the fall of 2024 in two federal court rulings that stayed the implementation of the expanded fiduciary rule.

On Tuesday, the Department of Labor filed a motion in the U.S. 5th Circuit Court of Appeals to hold its appeals in two court cases about the DOL’s fiduciary rule, saying the new administration and agency officials need time to onboard and familiarize themselves with the cases.

In the motion, the government noted that the opposing parties, led by the American Council of Life Insurers and the Federation of Americans for Consumer Choice, do not oppose the motion.

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Notices of appeal had been filed by the DOL in September 2024 in U.S. District Court for the Northern District of Texas and U.S. District Court for the Eastern District of Texas, Tyler Division, with a full appeal to the U.S. 5th Circuit Court of Appeals pending after two district court rulings stayed the effective date of the fiduciary rule regulation. 

“To allow new DOL officials sufficient time to become familiar with the issues in these cases and determine how they wish to proceed, the government respectfully moves to place these consolidated appeals in abeyance, with status reports due at 60-day intervals,” the agency said.

“In the event this Court denies the motion for an abeyance, all parties jointly request a one-week extension, to and including February 21, 2025, for appellees to file their response briefs,” the filing continued.

History of the Fiduciary Rule Battle

The fiduciary rule, formerly called the Retirement Security Rule, was the DOL’s second attempt in the past decade to bring retirement investment advice, including individual retirement account rollovers and small employer-plan advisement, under fiduciary obligation. The rule had been finalized with a September 23, 2024, start date but hit legal roadblocks from complaints filed by industry firms and member organizations. 

The Northern District of Texas put a national stay on the rule in a July 26, 2024, opinion in American Council of Life Insurers v. DOL. One day prior to that ruling, the Eastern District of Texas had also granted a stay for the plaintiffs in a separate caseFederation of Americans for Consumer Choice Inc. et al. v. DOL et al

In 2018, the 5th Circuit, which hears appeals from federal courts in Louisiana, Mississippi and Texas, invalidated a DOL fiduciary rule in Chamber of Commerce v. U.S. Department of Labor. The DOL argued that the rule currently being challenged is different, in part because it more clearly addresses when retirement plan rollover advice and annuity sales fall under fiduciary guidance. 

U.S. District Judge Reed C. O’Connor, however, presiding in the Northern District of Texas, wrote in granting the stay that Chamber played a role in his decision. 

“As a whole, Defendants’ arguments [against the lawsuit] are nothing more than an attempt to relitigate  the Chamber decision,” O’Connor wrote. “Because the Fifth Circuit’s Chamber decision unambiguously forecloses all of Defendant’s arguments, the Court need not repeat why those arguments fail here.”

Most Advisers Say Bitcoin and Digital Assets Misaligned With Fiduciary Duty

Advisers see a more favorable regulatory environment but also seek more independent education about cryptocurrency assets.

When considering whether to recommend digital assets for clients, financial advisers are concerned about their fiduciary duty to clients and want more unbiased education, according to a survey from CoinShares International Ltd.

Nearly two-thirds (62%) of advisers surveyed believe recommending a speculative asset like bitcoin does not align with their legal obligation to act in their clients’ best interest, and 79% of advisers believe their role is shifting toward risk management, as their clients may seek cryptocurrency investments independently. More than half of the 250 advisers surveyed worry that recommending digital assets could have a negative impact on their relationships with their colleagues.

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Furthermore, 74% of respondents said the pressure to align with traditional financial goals conflicts with the push from cryptocurrency firms to make digital assets a core portfolio component. More than half (53%) of advisers ranked volatility as a top concern when considering whether to advise clients about potential digital asset investments.

As advisers are more willing to consider digital assets, they recognize a need for education—but want it to be independently offered. More than eight out of 10 advisers surveyed said they are willing to pay for education to enhance their knowledge of digital assets, but preferably not from a digital asset provider, as 43% said crypto-native firms publishing biased information is a barrier to further understanding.

However, advisers are increasingly changing their perspectives on digital assets, especially as they see a more favorable regulatory climate: 85% of advisers said the 2024 U.S. presidential election impacted how they are advising clients on portfolio diversification.

Nearly two in three advisers said approval by the Securities and Exchange Commission is one of the three factors that most impacts their ability to present digital assets as investment opportunities to clients, with the vast majority (88%) feeling more optimistic about digital assets since the SEC’s approval of bitcoin and Ethereum exchange-traded funds.

Firms are shifting as well, with most advisers (85%) noting the sentiment of their organization toward digital assets has changed since the election.

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