States ask court to reconsider decision on Obama-era financial rule

California, New York and Oregon are pushing the New Orleans-based federal appeals court to reconsider its decision to strike down an Obama-era regulation that required retirement advisers to act in the best interest of their clients.  

The states’ attorneys general filed a motion in the 5th Circuit Court of Appeals Thursday morning asking the court for permission to defend the Labor Department rule in court and rehear with its full panel of judges the lawsuit brought by the U.S. Chamber of Commerce and 21 other business and financial groups. 

In a 2-1 ruling last month, the court said the rule bears the hallmarks of “unreasonableness” and constitutes an arbitrary and capricious exercise of administrative power.   

In their motion to intervene and petition for a rehearing, the states’ attorneys general argued the court’s decision will deprive millions of Americans basic safeguards as they seek financial advice about their retirement investments.

“The Fiduciary Rule is an important measure that protects and empowers retiring workers for whom every dollar is crucial,” California Attorney General Xavier Becerra said in a statement.

 “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.” 

AARP also asked the court on Thursday to rehear the case and to allow it to intervene to defend the rule. 

The Chamber of Commerce and other groups say the Labor Department rule erased the universally recognized distinctions between salespeople and fiduciary advisers and reconfigured relationships among financial and insurance representatives and their customers in setting the new standards of conduct. 

In a joint statement Thursday, the Chamber, Financial Services Institute, Financial Services Roundtable, Insured Retirement Institute and Securities Industry and Financial Markets Association said the 5th Circuit got it right when it struck down the rule. 

“We will oppose any motion to intervene in this case at this late stage,” the groups said.