The scant remaining life support for the Fiduciary Rule crafted by the Obama Department of Labor (DOL) ran out yesterday as the Trump administration declined to ask the Supreme Court to review an injunction blocking the rule’s implementation.

fiduciary-rule-dies-without-an-appeal-to-SCOTUSIn March, the 5th U.S. Circuit Court of Appeals, in a 2-to-1, vote vacated the rule, saying the DOL had overstepped its authority. In May, the same court rebuffed two appeals by the attorneys general of California, New York and Oregon, leaving a window until June 13 for the government to ask the Supreme Court to repeal the injunction.

Financial Advisor magazine reported on why there was no appeal: “A Labor Department spokesman referred questions to the Justice Department, noting that it represents the government in such cases. The Justice Department declined to comment.”

Just two weeks into his presidency, Donald Trump issued an executive order about the rule, asking the DOL “to determine whether it may adversely affect the ability of Americans to gain access to retirement information and financial advice.”

The Fiduciary Rule, also known as the Best Interest Rule, required investment advisers to put the interests of their clients first, guiding them to the most suitable retirement plans and not to products that pay the highest fees or commissions to the advisers.

The Obama DOL itself admitted that implementation would cost banks and investment advisers some $3 billion; industry insiders said it was closer to $5 billion. Merrill Lynch, among others, switched to a fee-based advisory model in response to the rule, and has hewed to that standard ever since.

SEC Steps In

The Securities and Exchange Commission (SEC) is now floating its own fiduciary rule idea for public comment through Aug. 7. (In fact, the SEC Investor Advisory Committee is meeting in Atlanta today to discuss the rule.)

Specifically, the newer SEC proposal requires that brokers disclose all “key facts” about potential conflicts and mandates that they have a “reasonable basis” to conclude investment products are in their clients’ best interest, the agency said in a statement. It would also require that firms note and mitigate “material conflicts of interest” related to financial incentives.

The proposal directs brokers to develop a disclosure form, not to exceed four pages, that reveals to their clients pertinent information such as their services, fees and standards. To avoid confusion, the rule also bars brokers from using the title of “advisor” or “adviser.”