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Speaker 1: The Labor Department's Fiduciary Rule is intended to stop conflicted

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Speaker 1: advice from financial advisors that the government says drained seventeen

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Speaker 1: billion dollars a year from retirement accounts. The law doesn't

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Speaker 1: go into effect until April, but the lawsuits to stop

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Speaker 1: its implementation are in full swing. There are several lawsuits

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Speaker 1: challenging the rule under a variety of legal theories, and

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Speaker 1: the Labor Department is to and o with favorable rulings

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Speaker 1: in federal courts in Kansas and DC. My guests or

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Speaker 1: Elliott Stein, senior financial litigation analysts for Bloomberg Intelligence and

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Speaker 1: Richard Painter, professor at the University of Minnesota Law School.

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Speaker 1: Elliott tell us a little about the Fiduciary Rule and

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Speaker 1: the main arguments the plaintiffs are making in these lawsuits. Sure,

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Speaker 1: thanks for having with June. So, like you said, the

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Speaker 1: rule is designed to reduce conflicts of interest in the

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Speaker 1: provisions of investment advice to retirement professionals. Does that by

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Speaker 1: expanding the types of finance professionals and conduct that have

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Speaker 1: to abide by the fiduciary standard of care. So whereas uh,

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Speaker 1: you know, fiduciaries used to cover registered investment advisors primarily

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Speaker 1: now under the fiduciary this rule, there's proposed this finalized

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Speaker 1: rule now it would sweep in UM. In addition to

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Speaker 1: registered investment advisors, it would sweep in broker dealers, insurers,

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Speaker 1: insurance salespeople UM, and many more professionals who are selling

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Speaker 1: retirement related investment products. And Richard, on what grounds are

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Speaker 1: the plaintiffs in these cases challenging the rule. Well, a

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Speaker 1: lot of these claims are the administrative Procedures Act, that

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Speaker 1: the appropriate procedures weren't followed. UH. And also there's some

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Speaker 1: questions of statutory authority, UM, whether there's something that Department

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Speaker 1: of Labor ought to be getting into. UH. The objections

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Speaker 1: to this, for the most part, though that I think

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Speaker 1: are sound or are not legal objections, but policy concerns

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Speaker 1: with the rule and the costs of implementing the rule

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Speaker 1: that the industry has and that I believe may be

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Speaker 1: persuasively the incoming Trump administration. UH. And so this is

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Speaker 1: really a bottle that ought to be conducted on the

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Speaker 1: policy front rather than in the courts, where I think

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Speaker 1: the courts properly defer to the agency unless the agency

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Speaker 1: is clearly going beyond the statutory authority set forth by Congress,

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Speaker 1: and then the plaintiffs have not so far made that case.

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Speaker 1: One more question about the lawsuits before we move on

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Speaker 1: to what may happen under a Trump administration. Elliott, what

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Speaker 1: is the likelihood that the plaintiffs will succeed in in

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Speaker 1: any of these lawsuits? Well, like you said, that's the outset.

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Speaker 1: They are too and oh so far. Um So at

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Speaker 1: the district court level, there's sort of running out of

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Speaker 1: courts to win over. Uh. They lost the case in

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Speaker 1: DC so far. In the case in Kansas, they do have,

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Speaker 1: um a ruling that they were waiting. In the Northern

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Speaker 1: District of Texas, the judge their held oral arguments in November. Uh,

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Speaker 1: she seemed to cite the DC rulin Um favorably. Um.

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Speaker 1: She was, you know, she asked good questions and tough

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Speaker 1: questions of both sides. Um. But she did also mention that, um,

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Speaker 1: you know, the court is not there to second guess

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Speaker 1: the Labor Department, Um, and the and the agency just

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Speaker 1: has to be justified in its conclusion, which leads me

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Speaker 1: to believe that she will also rule for the Labor Department.

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Speaker 1: Richard Congressional Republicans have tried to repeal the rule, but

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Speaker 1: President Obama has the veto vote. Are they likely to

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Speaker 1: try to repeal the rule again? Is the legislature legislature

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Speaker 1: the way that this will go. Oh, I think there

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Speaker 1: will definitely be efforts to repeal the rule. The industry,

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Speaker 1: the investment advisor industry, and much of the anential services

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Speaker 1: industry wants this role to the repeal uh and UH,

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Speaker 1: this is going to be a political battle. I'm not

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Speaker 1: sure all Republicans though, are going to be a favor

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Speaker 1: of repealing the rule. The problem is there there. In theory,

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Speaker 1: it's actually a good rule. That's someone who is managing

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Speaker 1: or advising you on your retirement money should keep your

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Speaker 1: interests to prioritize the interests of the investor, and should

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Speaker 1: have a fiducial relationship with investor. Uh, not the relationship

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Speaker 1: of a sales person who's trying to sell them products. UH.

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Speaker 1: And the combining advice with sales pitches and undisclosed conflicts

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Speaker 1: of interest. So in theory this is a is a

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Speaker 1: very good rule. The problem is in the United States

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Speaker 1: we have a very lititious society and the way it

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Speaker 1: is going to end up being in forced as lots

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Speaker 1: of losses fin investors against in the advisors, accusing them

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Speaker 1: a breach of fiduciary duty. Uh, and that has going

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Speaker 1: to of course be impacted him. They incorporated into the

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Speaker 1: cost of providing invested advisors selling financial products to investors,

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Speaker 1: and ultimately that could raise costs for the investors. So

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Speaker 1: the problem isn't necessarily the fiduciar concept, which is a

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Speaker 1: very good one. But the problem maybe it will be

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Speaker 1: the mechanisms that could be used to enforce this once

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Speaker 1: the Department of Labor will goes into effect and all

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Speaker 1: these invested advisors and that big subject of fiduciary standard.

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Speaker 1: Elliott in one in thirty seconds. Is it possible for

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Speaker 1: Trump's new Labor secretary to just provoke the rule? Well,

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Speaker 1: to repeal it, they would probably have to go through

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Speaker 1: the same administrative process um that they went through to

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Speaker 1: come up with the rule, and that can take many

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Speaker 1: months is not years um, So more likely they might

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Speaker 1: just say that they're delaying and momentation of the rule.

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Speaker 1: But the short of it is that these suits will

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Speaker 1: likely continue while that process plays out. Thank you both.

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Speaker 1: That's Elliott Stein's and your financial litigation analyst for Bloomberg

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Speaker 1: Intelligence and Richard Painter, Professor at the University of Minnesota

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Speaker 1: Law School.