Securities Litigation Blog

Why The DOL’s Fiduciary Rule Is So Important

  • Jun 9, 2017

Today, the Department of Labor’s fiduciary duty rule will become effective.  The fiduciary duty rule requires that those providing investment advice with regard to retirement plans and accounts act exclusively in the best interest of the customer and put the customer’s interest of being in safe, suitable and cost effective investments above the interest of the financial advisor to profit from such transactions. Essentially, the fiduciary duty rule is focused on reducing conflicts of interest that may arise in financial professionals’ investment recommendations for retirement accounts. The rule applies whether the financial advice is provided to multi-billion dollar pension funds or an individual’s IRA or 401K account.

The prudent investment of the retirement funds you have spent a lifetime building is of critical importance to your peace of mind and future security and wellbeing.  Inherent in the relationship with your financial advisor is a sense of trust that your advisor is acting at all times in your interest to protect and grow your retirement nest egg.  Financial advisors present themselves as having, and should have, superior knowledge about investment and/or insurance alternatives to meet your financial goals. You would rightfully be left with a profound sense of betrayal if you found that your financial advisor was hard selling you a risky or unsuitable financial investment or annuity policy simply to earn a large commission.  You would similarly feel betrayed if you found that you were paying unnecessarily high commissions.

The fiduciary duty rule expands the “investment advice fiduciary” definition under the Employee Retirement Income Security Act of 1974 (“ERISA”) beyond trustees of retirement pension funds or accounts to include all financial professionals who work with retirement plans or provide retirement planning advice. The fiduciary duty rule makes it clear that your financial advisor may be held liable if, in providing you with investment advice in your retirement account, he or she does not exclusively act in your best interest. 

This rule has been aggressively opposed by the financial industry, which continues to seek legislation or regulatory action to roll back this rule.  Nevertheless, on May 22, 2017, Department of Labor Secretary Alexander Acosta wrote a Wall Street Journal op-ed piece entitled, “Deregulators Must Follow the Law, So Regulators Will Too” in which he stated that the fiduciary duty rule will take effect without further delay and that “[w]e [the Department of Labor] have carefully considered the record in the case and the requirements of the Administrative Procedure Act, and have found no principled legal basis to change the June 9 date while we seek public input.”

Time will tell whether Wall Street will prevail in rolling back this important consumer protection.  

McCausland Keen + Buckman represents investors in securities arbitration and litigation matters involving disputes with brokerage firms, investment advisors and other financial institutions. If you are an investor with concerns about your broker-dealer, your securities portfolio, or a particular investment, please contact us for an evaluation – at no cost or obligation to you. You may have a viable claim for recovery of your investment losses by filing an arbitration claim with FINRA, the Financial Industry Regulatory Authority. 


DISCLAIMER: Although McCausland Keen + Buckman always strives to provide accurate and current information, the foregoing is intended for general informational purposes only, shall not be construed as legal advice, and does not create or constitute an attorney-client relationship.

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