(Bloomberg) --Wall Street and business lobbying groups have teamed up to fight the Obama administration’s new rules for U.S. brokers managing retirement accounts, saying the regulations include a “ deliberately unworkable” fiduciary standard.
The U.S. Chamber of Commerce joined groups including the Securities Industry and Financial Markets Association and the Insured Retirement Institute in filing the lawsuit Wednesday in Dallas federal court against the Department of Labor and Secretary Thomas Perez. The industry organizations allege that the department, which created the rules, encroached on the U.S. Securities and Exchange Commission’s territory and overstepped boundaries for regulating broker-dealers that were established by Congress.
The Labor Department released what’s known as the fiduciary duty rule in April, with administration officials saying it will help protect millions of savers from conflicted investment advice that costs the public $17 billion annually.
The White House has said the tougher standard will eliminate hidden incentives that cause brokers to push investment products with high fees and commissions. The industry argues that the rule will hurt less-affluent investors, because firms facing steeper compliance costs will drop smaller accounts.
“The rule will shackle Main Street financial advisers with extensive new requirements and constant liability, forcing them to limit the options and guidance they provide to retirement savers,” the groups said Thursday in a statement. “This lawsuit is necessary to prevent the Labor Department from exceeding the authority that was assigned to it by Congress.”
Financial firms have fought the new regulation for six years. Stopping it from taking effect probably requires help from Congress or winning a legal battle. As a result, lawsuits were widely expected and Republican lawmakers have introduced legislation to block the rule from taking effect. While both the U.S. House of Representatives and Senate have passed the measure, President Barack Obama has said he plans to veto the bill if it reaches his desk.
“If Wall Street really cared about Main Street it would already act in clients’ best interest, rather than secretly pocketing tens of billions of dollars from hardworking Americans,” said Dennis Kelleher, president of Better Markets, a group formed after the 2008 financial crisis to lobby for financial reform.
The case is Chamber of Commerce of the United States of America v. Perez, 16-cv-1476, U.S. District Court, Northern District of Texas (Dallas).
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