Appeals Court Overturns Rule to Protect Workers from Conflicted Financial Advice

Mark Gruenberg

Mark Gruenberg Editor, Press Associates Union News

Big business beat the nation’s workers, retirees and savers in federal court as the 5th U.S. Circuit Court of Appeals has tossed out the Labor Department’s fiduciary rule – the one that requires your pension and IRA advisors to put your interests first.

The 2-1 decision by a panel of the judges on March 15 upset the National Consumers League, one of many consumer groups which lobbied for the rule, handed down during the Obama administration.

The appellate court, “with Chief Justice Carl Stewart offering a spirited dissent, issued a legally flawed decision that undoes a critically important Labor Department rule intended to protect the financial interests of retirees and other investors,” said NCL Executive Director Sally Greenberg.

“Simply put, the DOL rule requires financial advisors to put the interests of their clients first. This seems pretty straightforward, but the Chamber of Commerce and other industry interests have consistently opposed this common-sense requirement.”

“The majority misapplied the law, issued an opinion that conflicts with the decisions of every other court that considered the rule, and discounted the dramatic changes in the retirement landscape over the last 40 years. The results could potentially cost retirement savers as much as $17 billion annually.”

Greenberg called the ruling “a setback for all investors, especially those planning for or currently in retirement. It also threatens the Labor Department’s ability to protect investors now and in the future.”

“We urge the Justice Department to appeal this decision, put retirement savers’ interests first, and defend DOL’s authority to impose reasonable standards on those who make a living investing other people’s money.” GOP President Donald Trump’s Justice Department had no immediate comment on whether it would appeal to try reinstate the fiduciary duty rule.


Appellate Judge Edith Jones, a GOP Reagan administration nominee, said DOL went too far and brought too many firms into the reach of its fiduciary rule. The other judge who joined Jones was a George W. Bush nominee.

Jones came down for bankers and brokers in tossing DOL’s rule. It “already spawned significant market consequences, including the withdrawal of several major companies…from some segments of the brokerage and retirement investment market,” she said. “It is likely many financial services firms will exit the market” rather than follow DOL’s new rules.

She also said “the SEC has the expertise and the authority to regulate brokers and dealers uniformly.”

The dissenting judge, Stewart, nominated by Democratic President Bill Clinton, said Jones didn’t look at the real world, where IRAs – which leave retirement investment decisions up to individuals – have supplanted traditional pensions, except in cases where people have no retirement savings at all.

“This sea-change within the retirement investment market also created monetary incentives for investment advisers to offer conflicted advice, a potentiality” DOL’s pre-Obama fiduciary rule “was not enacted to address.” All Obama’s DOL did was to ban investment advisors’ conflicts of interest, close loopholes in the old rule and bring it in line with pension conditions of the 21st century.

The U.S. Chamber of Commerce and its corporate allies, which sued to stop the fiduciary rule, crowed. The Chamber then said another agency – the more technical and business-oriented Securities and Exchange Commission – “should now take the lead on a clear, consistent, and workable standard that does not limit choice for investors.” Neither the court majority nor the Chamber mentioned workers.

And right-wing congressional Republicans, led by House Financial Services Committee Chairman Jeb Hanserling, R-Texas, were also happy. He charged that DOL’s rule from “unelected, unaccountable bureaucrats…would harm the very people” – retirees and workers, though he did not say so – “it’s intended to help.”

Obama’s DOL instituted the rule after finding the fiduciaries – brokers, bankers, hedge funds and the like – put their own interests first when recommending investments to pensioners, pension plans and IRA holders.

Last June, some provisions began, requiring the fiduciaries “to provide advice that aligns with clients' best interests, charge reasonable compensation” and not make misleading statements. But after the judges’ ruling, DOL said it won’t even enforce that.  



Posted In: Allied Approaches

Union Matters

Get to Know AFL-CIO's Affiliates: National Association of Letter Carriers

From the AFL-CIO

Next up in our series that takes a deeper look at each of our affiliates is the National Association of Letter Carriers.

Name of Union: National Association of Letter Carriers (NALC)

Mission: To unite fraternally all city letter carriers employed by the U.S. Postal Service for their mutual benefit; to obtain and secure rights as employees of the USPS and to strive at all times to promote the safety and the welfare of every member; to strive for the constant improvement of the Postal Service; and for other purposes. NALC is a single-craft union and is the sole collective-bargaining agent for city letter carriers.

Current Leadership of Union: Fredric V. Rolando serves as president of NALC, after being sworn in as the union's 18th president in 2009. Rolando began his career as a letter carrier in 1978 in South Miami before moving to Sarasota in 1984. He was elected president of Branch 2148 in 1988 and served in that role until 1999. In the ensuing years, he worked in various roles for NALC before winning his election as a national officer in 2002, when he was elected director of city delivery. In 2006, he won election as executive vice president. Rolando was re-elected as NALC president in 2010, 2014 and 2018.

Brian Renfroe serves as executive vice president, Lew Drass as vice president, Nicole Rhine as secretary-treasurer, Paul Barner as assistant secretary-treasurer, Christopher Jackson as director of city delivery, Manuel L. Peralta Jr. as director of safety and health, Dan Toth as director of retired members, Stephanie Stewart as director of the Health Benefit Plan and James W. “Jim” Yates as director of life insurance.

Number of Members: 291,000 active and retired letter carriers.

Members Work As: City letter carriers.

Industries Represented: The United States Postal Service.

History: In 1794, the first letter carriers were appointed by Congress as the implementation of the new U.S. Constitution was being put into effect. By the time of the Civil War, free delivery of city mail was established and letter carriers successfully concluded a campaign for the eight-hour workday in 1888. The next year, letter carriers came together in Milwaukee and the National Association of Letter Carriers was formed.

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