A federal judge ruled Wednesday in favor of a rule meant to revamp the type of advice brokers give to retirement savers.
The decision from Chief Judge Barbara Lynn of the Northern District of Texas found that the Labor Department did not exceed its authority when it created what’s known as the fiduciary rule. The rule requires brokers offering advice to retirement savers to put their client’s interests ahead of their own.
Supporters of the regulation celebrated the ruling, which has received strong resistance from Republicans and industry groups since it was first introduced more than six years ago. The regulation targets situations where retirement savers may receive advice that is not in their best interest, such as incidents where they may be pointed toward investments that can lead to a bigger payday for the broker even though another option may be a better fit for the saver.
Opponents say the rule can make it more difficult for some brokers to work with savers who have small account balances, and that some firms may drop investment products that they fear will come under more scrutiny, potentially limiting options for savers.
The industry groups that sued to block the rule, including the Chamber of Commerce, the Financial Services Roundtable and the Securities Industry and Financial Markets Association, said Wednesday that they would continue to fight the regulation.
“We continue to believe that the Department of Labor exceeded its authority, and we will pursue all of our available options to see that this rule is rescinded,” the groups said in a statement. “While we have long supported a best interest standard, this is a misguided rule that will harm retirement savers and financial services firms that provide needed assistance and options to their clients, including modest savers and small business employees.”
The court ruling comes less than a week after President Trump signed a memorandum asking the Labor Department to review the regulation and decide whether it should be revised or rescinded. It is still not clear whether the president’s move will delay the rule, which is supposed to take full effect in April. As of Monday, the Labor Department said it was considering legal options to delay the rule and comply with the president’s memorandum, which called on the department to research whether the rule was harmful to investors.