- Benzinga Advisor
- Posts
- New Fiduciary Rule Sparks Legal Battle
New Fiduciary Rule Sparks Legal Battle
Lawsuits claim the new DOL rule is regulatory overreach
Happy Sunday everyone, and welcome to Benzinga’s financial advisor newsletter.
In today’s newsletter, we break down the evolving legal landscape surrounding the Department of Labor's new fiduciary rule, which is slated to take effect in September.
With legal battles brewing and experts divided on the outcome, financial advisors face uncertainty amidst the push for expanded fiduciary standards. However, today’s Industry Chatter piece cuts through the noise and provides key insights on the new fiduciary rule, its implications, and how it will hold up in court.
Lastly, if you would like to be featured in our upcoming advisor spotlight editions, click here to send us an email.
INDUSTRY CHATTER
The DOL has a new policy on the table that expands the fiduciary standard. The policy aims to apply this standard to any individual providing advice on rolling over a retirement account, even in situations with one-time advice.
The policy is set to go into effect in September and would impact broker-dealers, insurance salesmen, CPAs, and other financial professionals. Fiduciary requirements are standards that require a person to act in a client’s best interest. Failure to comply with the requirements results in litigation and penalties.
Bring In The Lawyers
A lawsuit aiming to block the rule has been filed, and some experts believe other suits could follow.
The first lawsuit is from the Federation of Americans for Consumer Choice (FACC), an organization that lobbies for the insurance industry. The group argued that the Department of Labor is going beyond its authority in issuing this rule.
The FACC is pushing for an injunction while the case is pending.
A Revamped Rule
The Department of Labor isn’t backing down in the face of opposition.
The department has expressed confidence that the policy will withstand legal challenges. A similar rule was issued during President Obama’s term, but it was hampered by legal challenges. At the time, it was decided that the rule overstepped the DOL’s authority.
Officials at the current DOL hold that the new rule is slightly different, which should allow it to avoid the fate of the previous policy.
Experts Weigh In
There are divided opinions on whether the Department of Labor will win in a court of law. However, a recent report from a major law firm contends that the DOL is fighting an uphill battle.
The law firm, Eversheds Sutherland, reported that Biden’s policy “will have more exposure in litigation” than the previous proposal.
The firm pointed out that the new rule only differs slightly from the previous iteration which still makes the DOL “vulnerable to claims of regulatory overreach.”
The report also argued that the issues surrounding standards for retirement advice should be handled at a congressional level.
Given that legislation is frequently hung up in Congress, the idea that lawmakers in Washington will tackle this issue could be overly optimistic. Whatever the future of this rule, financial professionals should stay abreast of the updates.
WHAT THE PROS ARE WATCHING
As a financial advisor, staying ahead of market movements is crucial for guiding your clients to success. With Benzinga Pro, you can take your advisory services to the next level by creating custom watchlists tailored to each of your clients' unique investment goals and preferences.
Our platform empowers you to monitor big moves in real-time, allowing you to react swiftly to market shifts and keep your clients informed and confident in your expertise. Whether you're tracking specific stocks, sectors, or market indices, Benzinga Pro provides the tools you need to stay informed and proactive in managing your clients' portfolios.
Say goodbye to manual tracking and hello to efficiency with Benzinga Pro's intuitive interface and customizable features. Join thousands of financial advisors who rely on Benzinga Pro to enhance their advisory services and drive better outcomes for their clients.
MARKET RECAP
Major market indexes rallied back to record highs during the week, marking the fourth consecutive week of gains. This surge was buoyed by inflation data that was broadly in line with expectations, easing concerns from the first quarter about resuming price pressures and bolstering investor expectations for potential interest rate cuts.
In April, the Consumer Price Index (CPI) increased by 3.4% compared to the same month last year, down slightly from March's 3.5% annual rate and matching estimates.
The Dow Jones Industrial Average reached the 40,000 mark on Thursday, pushing its bull market rally to nearly a 25% surge since October.
Among sectors, semiconductors, as tracked by the iShares Semiconductor ETF, continued to outperform, as sentiment toward AI-driven growth remains elevated.
Meme Stocks On Rollercoaster
A key market theme during the week was the resurgence of meme-related stocks. Shares of AMC Entertainment Holdings Inc. and GameStop Corp. skyrocketed on Monday and Tuesday as social media influencer Keith Gill, known for sparking the 2021 meme stock frenzy, returned after a three-year break.
GameStop Tanks
GameStop shares dropped 25.9% following the announcement Friday of a 45-million-share offering and disappointing preliminary first-quarter revenue estimates, which came in below analyst expectations.
Reddit Partners With OpenAI
Reddit Inc. stock spiked higher after announcing a partnership with OpenAI. The collaboration will grant OpenAI’s ChatGPT access to Reddit data and introduce AI-powered features to Reddit.
Buffett Buys Chubb
Warren Buffett's Berkshire Hathaway Inc acquired 26 million shares of Chubb Ltd, signaling confidence in the insurer despite challenges in the insurance market due to climate change. The $6.7-billion stake has made Chubb Berkshire’s ninth-largest holding.
Dimon's Fiscal Warning
Jamie Dimon, CEO of JPMorgan Chase & Co., expressed concern over the national deficit, which reached $1.9 trillion in 2024, representing over 6% of GDP. Dimon emphasized the need for the government to address this issue to avoid potential economic instability, stressing the importance of balancing deficit reduction with sustainable growth.
Cybertruck Lags Rivals
Tesla Inc.’s Cybertruck, launched in November 2023, trails behind Ford Motor Co.‘s F-150 Lightning in registrations, but surpasses Rivian Automotive Inc.’s R1T and General Motors Co.‘s Silverado EV. In March, the Cybertruck had 1,158 registrations, compared to 2,893 for the F-150 Lightning.
LEARN WITH BENZINGA PRO
THE WEEK AHEAD
Economic Data
Monday: Fed Vice Chair Philip Jefferson speaks
Tuesday: Cleveland Fed President Loretta Mester, Atlanta Fed President Raphael Bostic, and Boston Fed President Susan Collins speak together on a panel
Wednesday: Existing home sales, Minutes of Fed’s May FOMC meeting
Thursday: Initial jobless claims, S&P flash US services PMI, New home sales, Atlanta Fed President Bostic speaks
Friday: Durable-goods orders, Consumer sentiment
Earnings
Monday: Novartis, ASML, Amgen, Deutsche Post
Tuesday: AT&T, AstraZeneca, Coca-Cola, Bank of America
Wednesday: Deutsche Telekom, American Tower, Roche Holding, Aalberts, Align Technology
Thursday: Adidas, Autodesk, Assurant
Friday: Southern Copper, Six Flags, Acer, ASE Technology
Click here for the full calendar of economic data and earnings reports.
GROW YOUR BUSINESS WITH BENZINGA
There are two ways Benzinga can help you grow your business: generating leads and keeping your clients engaged.
Generate Leads: 14 million investors visit Benzinga’s site every month. We have hundreds of thousands of email subscribers, exclusive events, topical webinars, and more. We help our audience build wealth, and we partner with advisors like you to help them manage it. Click here to have leads sent directly to your inbox every week.
Engaging Existing Clients: Once these clients are in the door, you need to keep them engaged. Why? Because if you don’t, your competitors will. How do you do this? Consistent content. All of the content above can be sent to your clients under your name. We can also help you create unique content. Click here to ask us about licensing and content creation to keep your clients engaged.