(Photo: J. Scott Applewhite/AP) U.S. Supreme Court in Washington. (Photo: J. Scott Applewhite/AP)

The Department of Justice did not petition the Supreme Court on Thursday to challenge the U.S. Court of Appeals for the 5th Circuit’s decision to vacate the Department of Labor’s fiduciary rule. Industry officials say that the DOJ’s decison, while not surprising, further signals the rule’s demise.

Labor’s fiduciary rule will officially die on the vine once the 5th Circuit issues its mandate vacating the rule.

DOJ had 90-days from when the 5th Circuit issued its mandate to vacate the fiduciary rule on March 15, to petition the Supreme Court to review the 5th Circuit ruling.

A legal observer told ThinkAdvisor on Friday that the “DOJ did not file a petition for certiorari [by Thursday], but the mandate itself has not yet been issued.” This could mean that DOJ still has time to petition the Supreme Court.

Industry officials are opining Labor’s next fiduciary-related move.

“DOL will closely monitor developments at the Securities and Exchange Commission” and the securities regulator’s advice standards proposal, Steve Saxon, an attorney specializing in the Employee Retirement Income Security Act with the Groom Law Group in Washington, told ThinkAdvisor on Friday.

“Any expectation that SEC guidance [in this fiduciary realm] will be forthcoming by the end of the year is overly optimistic,” Saxon said. “I don’t think DOL will come out with guidance or exemptive relief on its own motion, at least in the near future.”

Rob Foregger, co-founder of NextCapital, added in comments to ThinkAdvisor that while Labor’s fiduciary rule “has now died several deaths,” the rule “has irreversibly accelerated the entire investment industry toward client-advisor alignment — and a fiduciary future.”

Foregger hopes the SEC’s Regulation Best Interest, or Reg BI, for brokers, which is part of the regulator’s advice conduct standards package, once in final form, ”will assist in moving the industry toward a unified fiduciary standard over the coming decade. Time will tell.”

Is a Uniform Fiduciary StandardRealistic?

Industry officials debated the likelihood that a “uniform fiduciary standard” for brokers and advisors would ever see the light of day during a Thursday meeting of the SEC’s Investment Advisory Committee, held in Atlanta.

Barbara Roper, director of investor protection for the Consumer Federation of America, a member of the SEC committee, asked a panel at the meeting if they would “be comfortable, since we have the apparent agreement that this [Reg BI] is intended to be, in essence, a fiduciary standard, if the commission called it a fiduciary standard?”

Karen Barr, president and CEO of the Investment Adviser Association, responded that “to me, a fiduciary standard means you’re a fiduciary throughout the entire relationship, so I don’t think this [Reg BI] is a fiduciary standard. I do think it [Reg BI] draws on fiduciary principles and it can get to a place where it’s as robust—[having] the core principles as a fiduciary standard.”

Ira Hammerman, general counsel for the Securities Industry and Financial Markets Association, responded, “We started down this journey calling for a uniform fiduciary standard. I’ll just assume that people a lot smarter than me in putting together this voluminous 1,000 page [SEC advice standards] proposal, in weighing all the pros and cons, decided that that was a bridge too far. We want to see something done here.”

At the end of the day, Hammerman continued, “there are strengths and weaknesses to both models—at the broker-dealer level, you’ve got FINRA kicking the tires, doing exams, … there’s no similar analogue on the investment advisor side even with the package of proposals put forward by the SEC.”

While there are differences in the broker and advisor models, he added, “I think we can achieve high standards for both.”

Hammerman also agreed with other comments made throughout the meeting that the SEC needs to issue “clear guidance on what’s meant by best-interest” in the Commission’s proposal.