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Dear Friend Update 6-2-23

From: Kim O’Brien <>
Sent: Friday, June 2, 2023 9:10 AM
To: Kim O’Brien <>
Subject: FACC Lawsuit Update – DOL Withdraws ASA Lawsuit Appeal


Dear Friends: 


We want to take this opportunity to provide an interim update on our lawsuit against the U.S. Department of Labor (DOL) challenging its attempt to expand the definition of fiduciary.   


At the same time we want to give our perspective on what might happen next given the latest developments including the DOL decision not to appeal its loss in the concurrent lawsuit brought by the American Securities Association (ASA) in the U.S. District Court in Florida.     


We have read numerous articles speculating that the DOL will be proceeding with new rulemaking and some suggest the DOL’s plans will be accelerated by the adverse decision in the ASA lawsuit.  From those articles one might presume further rulemaking is inevitable and such rulemaking will supersede or render moot the ASA decision and challenge brought by FACC.  We disagree that further DOL rulemaking is inevitable and strongly disagree that DOL can wave some magic wand to get around critical legal precedents including the Fifth Circuit’s Chamber of Commerce opinion and ASA decision.  


As most of you know, the DOL suffered a major setback in the challenge brought by ASA where the court vacated a foundational element of DOL’s new interpretation of the five part test.  The court said DOL cannot aggregate rollover advice given to an employer plan participant with subsequent IRA advice for purposes of satisfying the regular basis element of the five part test used to determine fiduciary status.  At first the DOL filed an appeal but then withdrew its appeal and now is asking the Magistrate Judge in FACC’s case for more time to address whether the entirety of its new interpretation is rendered unworkable by the ASA decision.     


FACC believes these matters have reached an important inflection point where DOL must decide how it intends to proceed both with regard to litigation and whether to prolong the controversy over who is a fiduciary with yet more rulemaking.  FACC subscribes to the view that “enough is enough” and hopes the DOL will choose a different course in which it comes to grips with the common law reality that everyday agents are not fiduciaries and recognizes the practical reality that other regulators (namely the NAIC and SEC) are addressing marketplace standards in a holistic way that obviates the need for an extra layer of regulation just for retirement plans.   


Contrary to the speculation of some, FACC believes the recent string of decisions including the Fifth Circuit’s Chamber of Commerce case, the ASA decision, and Carfora which was a precursor to the ASA decision, foreclose DOL’s ongoing efforts to turn salespeople into fiduciaries.  DOL cannot turn apples into oranges by decree and perhaps should accept that everyday agents and brokers are not fiduciaries under ERISA no matter how DOL tries to circumnavigate applicable laws.  However, certainly not all is lost from the DOL perspective given these issues are being addressed by other regulators.   


As most of you know, the NAIC model regulation incorporating best interest obligations has now been adopted in 37 states with more to follow.  DOL acknowledges in its briefing in the FACC case that “regulators of stockbrokers and insurance agents have, in recent years, adopted heightened conduct standards” and contends there are only “differences of degree between ERISA’s obligations and those adopted by NAIC Model Regulation.”  This invites the obvious question whether the time has come for DOL to give these new regulations including the SEC’s Reg BI and the NAIC Model, a chance to perform rather than fight on incessantly with further litigation or rulemaking.  


At this point, in our action we await the reply from the DOL to the Magistrate Judge on whether the decision to forego appeal in the ASA case renders what remains of the DOL’s new interpretation “unworkable.”  DOL requested and received an extension to respond by June 9th.  We remain committed more than ever to our lawsuit seeking to overturn the new interpretation in its entirety on grounds that it runs contrary to the Fifth Circuit decision in the Chamber of Commerce case.  It remains our view that DOL’s attempt to expand the definition of fiduciary would ultimately prove detrimental to consumer interests by creating an unnecessary layer of federal regulation stifling an otherwise robust financial services marketplace.   


We wish to thank all of you for your continuing interest and support and especially want to tip our hat to other trade organizations working to persuade the DOL to refrain from further rulemaking in favor of giving best interest regulations a chance to perform.  We hope DOL will rethink its approach on these matters and come to see it is time to turn the page.        


As always we welcome any additional feedback or comments.    



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