Brian P. O'Shea


March 20, 2018


Americans saving for their retirement won a major victory last Thursday when the 5th U.S. Circuit Court of Appeals struck down the Department of Labor’s (DOL) “fiduciary rule.” The ruling is a result of a U.S. Chamber filing, alongside other trade associations, against the DOL’s rule in February 2017.

While this victory is welcome, investors have unfortunately already felt the impact of the DOL rule being in effect. Many retail investors, especially working-class Americans, have been priced out of quality retirement advice, don’t have access to certain types of products and accounts, and don’t have a clear understanding of their financial adviser’s role and responsibilities. These limitations and uncertainty have hampered the ability of advisers to provide the critical retirement advice needed by millions of workers.

This ruling also represents a victory for American businesses and consumers in the battle to address regulatory overreach by Federal agencies. In the majority opinion’s ruling, Circuit Judge Edith Jones wrote that the DOL “did not deserve the deference that courts usually afford federal agencies,” and that it “acted unreasonably, arbitrarily and capriciously.” This is an affirmation of what we already know: the previous decade of seemingly incessant regulatory promulgation was a serious overreach.

The news out of the 5th Circuit creates space for the Securities and Exchange Commission (SEC) to take the lead on developing standards of conduct that serve all investors across all types of accounts. The SEC should issue a rule centered on promoting four basic principles: investor choice, clarity, opportunity, and protection.

  • Choice. Regulation should encourage multiple business models for advisers so investors can choose the investment program that best suits their needs. Specifically, rules should be appropriately tailored to the activities of broker-dealers to avoid jeopardizing investor access to different types of products and accounts.
  • Clarity. Regulation should make clear the responsibilities of advisers, regardless of the type of account or how much advice the investor needs. Investors should never be confused about what they can or cannot ask their advisers.
  • Opportunity. Regulation should make it easier for investors to access the advice they need to make informed decisions about saving for their future. Effective disclosures for advisers and enhanced investor education will empower Americans to save, without limiting their choices.
  • Protection. Regulation should level the playing field with tough and fair enforcement. Investors must be safeguarded from misconduct and bad actors that don’t play by the rules should be penalized.

When financial regulation is practical and reasonable, it serves all Americans, regardless of their economic situation or the size of the business they work for. The DOL’s fiduciary rule did not serve that goal. This ruling is just the step in the right direction we need toward making sure all Americans have access to sound, affordable financial advice.

We welcome the SEC’s forthcoming proposal and stand ready to continue to advocate for hardworking Americans that deserve choice, clarity, opportunity, and protection.

About the authors

Brian P. O'Shea