Attorney General Becerra Leads Coalition to Intervene in Federal Lawsuit to Protect Retirees Against Financial Advisors Who Put Their Own Financial Gain Ahead of Their Client’s Best Interests
SACRAMENTO – Joined by the Attorneys General of New York and Oregon, California Attorney General Xavier Becerra today filed a motion to intervene in Chamber of Commerce of the USA, et al. v. U.S. Department of Labor, et al. in order to defend regulations that require retirement investment advisors to put the interests of their clients above their own financial gain. The regulations, known collectively as the Fiduciary Rule, were proposed under the Obama Administration. They enshrined into federal law commonsense standards for professionals who give investment advice to people saving for retirement. However, a three-judge panel of the Fifth Circuit Court of Appeals in New Orleans on a vote of 2-1 recently struck down the Fiduciary Rule. Attorney General Becerra and his fellow Attorneys General are seeking to intervene in this case to ensure that the Rule is once again implemented.
“The Fiduciary Rule is an important measure that protects and empowers retiring workers for whom every dollar is crucial,” said Attorney General Becerra. “American families saving their hard-earned money for retirement deserve to know that the advice they receive is unbiased and in their best interest. We cannot go back to the days when retirement advisors could put their own financial gain ahead of the best interests of their clients who sacrificed to save for retirement. We are ready to defend the Fiduciary Rule in court.”
To date, three federal district courts and the Tenth Circuit Court of Appeals have upheld the Fiduciary Rule. But on March 15, 2018, a three-judge panel of the Fifth Circuit Court of Appeals issued a contested decision overturning the Rule, with the Chief Judge of the Fifth Circuit dissenting. In addition to filing the motion to intervene, the Attorneys General have concurrently filed a petition for rehearing en banc with the Fifth Circuit Court of Appeals. This petition will allow them to ask the full 17-judge court to rehear the matter and overturn the decision made by the three-judge panel.
In the motion to intervene and petition for rehearing en banc, the Attorneys General assert that the decision from the Fifth Circuit Court of Appeals:
- Will deprive millions of Americans of basic safeguards as they seek financial advice about their retirement investments;
- Will cost California at least $38 million in lost taxes over the next ten years and will cost hardworking Americans who are saving for retirement tens of billions of dollars;
- Wrongly held that the Department of Labor lacked authority to require financial advisors to holders of Individual Retirement Accounts (IRA) to act in their clients’ best interests; and
- Conflicts with the decisions of three other courts, including the Tenth Circuit Court of Appeals, that have upheld the Fiduciary Rule.
Attorney General Becerra previously expressed his concern over the Trump Administration’s illegal delay in implementing the Fiduciary Rule in 2017. In an letter to then-Acting Secretary of Labor Edward Hugler, Attorney General Becerra wrote, “after years of comprehensive study and debate, it is now time to act. I ask that the Department of Labor finally implement these important investor protections, without further delay.”
Since taking office, Attorney General Becerra has made protecting consumers a top priority. Among other actions, he has filed a lawsuit against Sutter Health, the largest hospital system in Northern California, for anticompetitive practices that result in higher healthcare costs for Northern Californians; announced a $125 million settlement with the Royal Bank of Scotland over misrepresentations about residential mortgage-backed securities sold to California's public employee and teacher pension funds; and has sued the Federal Communications Commission over its attempt to repeal net neutrality rules, which allow consumers to access online content without any interference by an internet service provider.
A copy of the motion to intervene and petition for rehearing en banc is attached to the electronic version of this release at oag.ca.gov/news.