DALLAS – A federal court in Texas denied U.S. Chamber of Commerce and business groups’ requests for emergency motions, which would have blocked a federal judiciary rule that requires financial professionals to act in their clients’ best interests when recommending investments products.
The Dallas Division of the Northern District of Texas ruled Monday that the Chamber and the other plaintiffs did not meet the four factors to satisfy an injunction pending an appeal. The Chamber appealed its case against the U.S. Department of Labor (DOL) to the 5th Circuit.
The emergency motions would have stopped the DOL from implementing its rule, which is scheduled to take effect April 10.
Business advocacy groups and other opponents have said the new law would lead to chaos in the financial services industry, causing between $10 billion and $31.5 billion in compliance costs for insurance, brokerage and financial services industries.
First, the court stated that this court has already found the plaintiffs’ arguments on the “merits unpersuasive, two other district courts have reached the same conclusion in similar cases, and neither court has enjoined enforcement of the rules." According to the court opinion, the plaintiffs did not present any new arguments that would lead it to question its decision or persuade it to believe the 5th Circuit would reach a different conclusion.
Also, the Chamber and its fellow plaintiffs claimed that without the injunction independent marketing organizations wouldn’t be able to comply with the rules, forcing them out of business, according to the court opinion. The court did not find that an injunction would prevent that outcome.
Plaintiffs further argued that granting the injunction would not harm the labor department. The court found that granting an injunction would interfere with the DOL’s “statutory authority, its expertise and its policy-making role,” according to court records.
According to the court opinion, plaintiffs also argued that granting the injunction would be in the public’s best interest. The court disagreed, finding that the DOL acted reasonably in concluding that “consumers needed protections from conflicted advice with respect to fixed indexed and variable annuities due to their complexity and risk.”