When Mark Twain learned that a newspaper had mistakenly printed his obituary, he reportedly responded by saying “Reports of my death are greatly exaggerated”. We could say the same about the Fiduciary Rule, although it may be on life support. It really is too soon to conclude, regardless of what some commentators are saying, that the recent Fifth Circuit decision invalidating the Fiduciary Rule sounds the Rule’s death knell.
First of all, it was an en banc decision rather than a decision of the full court. The Department of Labor could request a rehearing before the full court or appeal. Every other court that has reviewed the Fiduciary Rule has concluded, contrary to the Fifth Circuit analysis, that the Rule was a valid exercise of regulatory authority. This case could conceivably go up to the Supreme Court. I have even read opinions that if the Department of Labor refuses to defend the Rule, courts might allow consumer groups or other parties to step in to represent the public.
Even if this decision ends up being the final word on the current version of the Fiduciary Rule, you can’t turn back the clock. Fiduciary responsibility is still on everyone’s radar. Brokers and vendors who have been operating under a fiduciary standard will not find it so easy to tell clients that they are no longer willing to be fiduciaries. The Department of Labor is reviewing the Rule and may propose different standards in place of the current ones. States and the SEC are already stepping into the potential void as well, though I have doubts about whether ERISA preemption permits states to legislate their own fiduciary standards for retirement accounts.
One way or another, the investment landscape has been changed by this whole exercise. Higher standards of conduct are already in effect. It is naïve to think we can simply erase these developments as if they never happened.