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Judiciary Branch Continues To Stump Trump Admin As Judge Upholds Fiduciary Rule

Judiciary Branch Continues To Stump Trump Admin As Judge Upholds Fiduciary Rule
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The Trump administration suffered another drubbing at the hands of the judiciary, with a federal court upholding the Labor Department's Fiduciary rule. It was only on Thursday that a federal appeals court unanimously rejected Trump's Executive Order on entry ("travel ban"), which seeks to ban entry of refugees and travelers from seven predominantly Muslim nations into the United States.

Another Legal Setback

The latest ruling on the Fiduciary rule in defiance of a Trump Executive Order signed on February 3, rescinding the Fiduciary rule enacted by his predecessor. The executive order, though not taking effect immediately, sought the Labor Department to review options to cancel or modify the existing regulations.

The Rule That Sought To Uphold Consumer Interests

The Fiduciary rule put in place by the previous Obama administration was meant to take to task financial advisers, who made recommendations based on the fees and the commissions they would receive. The advisers often favored products that would fetch them higher fees and commission, not taking into consideration what would be in the best financial interest of their clients. Thus, the Fiduciary rule was supposed to be watershed regulation put in place to safeguard the interests of consumers, especially those saving for their retirement.

The Ruling

Chief Judge Barbara Lynn of the Northern District Court of Texas granted summary judgement to the Labor Department, rejecting all the major arguments put forth by the U.S. Chamber of Commerce, the Securities Industry and Financial Markets Association, the Financial Services Institute, the Financial Services Roundtable and the Insured Retirement Institute. Lynn denied the motion filed by the Justice Department, asking for a stay in the Dallas proceedings.

In her 81-page ruling, Lynn said the Labor Department did not exceed its authority in promulgating the regulation and said it was "not arbitrary or capricious," as the financial services industry had alleged. Notwithstanding the setback, financial interests are still hopeful that Trump will bail them out. This, according to a report filed by, is the third loss in the court for industry challenges to the rule.

Analyst Sees Delay In Implementing The Rule Despite Court Ruling

In a note, Height Securities noted the Acting Department of Labor Secretary Ed Hugler issued a statement saying the Labor Department will now consider its legal options to delay the applicability date as it complies with the President's memorandum.

The firm said, "We maintain our view that the effective date of the rule, which begins on April 10, will be delayed by six months. During this time, Congress will work to pass legislation designating the Securities and Exchange Commission to take the lead in developing a fiduciary standard for all investment accounts; however, given the early contentious nature of the 115th Congress, legislation seems like an unlikely outcome at this point. This means that DOL will either rescind or materially revise its Fiduciary Duty rule based on its legal and economic analysis."

Image Credit: "Donald Trump signs orders to green-light the Keystone XL and Dakota Access pipelines" By Office of the President of the United States [Public domain], via Wikimedia Commons

Posted-In: Barbara Lynn Donald TrumpNews Politics Legal Events Media General Best of Benzinga


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