Court refuses to let states, AARP intervene in Obama-era financial rule case

A federal appeals court on Wednesday said AARP and California, New York and Oregon could not intervene in a lawsuit business and financial groups brought challenging the Obama-era rule requiring retirement advisers to act in the best interest of their clients.

A three-judge 5th Circuit Court of Appeals panel denied the request from AARP and the states’ attorneys general filed jointly last week.

The parties had also petitioned the court to reconsider its March decision to strike down the rule and rehear the case with its full panel of judges.

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The court’s refusal to let the parties intervene in the case scraps their requests for it to reconsider its ruling. 

The appeals court sided with the Chamber of Commerce and 21 other business and financial groups in March when it struck down the rule in a 2-1 ruling.

It said the rule bears the hallmarks of “unreasonableness” and constitutes an arbitrary and capricious exercise of administrative power on behalf of the Department of Labor.

The court could still decide on its own to rehear the case en banc.  

In a joint statement Wednesday, the Chamber of Commerce, Financial Services Institute, Financial Services Roundtable, Insured Retirement Institute, and Securities Industry and Financial Markets Association hailed the court’s ruling.

“The SEC, not the DOL [Department of Labor], is the appropriate regulator in this area, and we look forward to working with the SEC on the current proposed rulemaking to establish a best interest standard across all accounts, and not just retirement accounts,” the groups said.

The AARP, meanwhile, called the court’s decision disappointing.  

“AARP will continue its efforts to fight on behalf of consumers who want financial advice in their best interest,” the group said in a statement. “It is hard enough to save for retirement — we should do all we can to make sure retirement savers are getting the help they need.”  

The New York and Oregon attorneys general could not be reached for comment.

California Attorney General Xavier Becerra (D) said in a statement that California is weighing its options.

“We’re evaluating our best options to continue to fight for all hardworking Americans who deserve to know the advice they receive about their hard-earned money is in their best interest,” he said.

–This report was updated on May 3 at 9:54 a.m.