The fiduciary rule survived another court challenge, but the victory may be a hollow one as the Department of Labor and SEC reconsider their approaches to a higher standard of client care.

An appeals court upheld yesterday an earlier court's decision against Market Synergy Group, which was seeking to overturn the Labor Department regulation on narrow grounds that the agency violated its rule-making process by providing an exemption for fixed-rate annuities but not fixed indexed annuities.

Fiduciary advocates welcomed the court's ruling.

"Today’s decision is another victory for every American trying to save for a safe and secure retirement," Stephen W. Hall, legal director and securities specialist for Better Markets, said in a statement. "The decision will help ensure that millions of Americans will not be swindled out of billions of dollars every year at the hands of financial advisors seeking to boost their profits and bonuses by recommending over-priced, under-performing, and high-risk investments for retirement savers."

Market Synergy Group could not be reached for immediate comment on the court's decision.

(Bloomberg News)
(Bloomberg News)

This also marks the latest case to be decided in the fiduciary rule's favor.

Several industry trade groups, including SIFMA, FSI and the Chamber of Commerce, are still awaiting a decision in their case appealing another judge's ruling against their attempt to have the fiduciary rule overturned. Their case is being heard in the U.S. Court of Appeals for the Fifth Circuit in New Orleans after a federal judge in Texas ruled in the Labor Department's favor.

These legal attacks on the rule began before President Trump's election. Shortly after taking office, Trump instructed the Labor Department to review its fiduciary rule with an eye toward amending or rescinding it.

The review is ongoing, though Secretary of Labor Alexander Acosta has delayed the implementation of the regulation's enforcement aspects until 2019.

The SEC, meanwhile, has begun considering its own rulemaking under Chairman Jay Clayton, who was appointed to his position by Trump. Although the commission has been authorized to craft a fiduciary standard since the Dodd-Frank Act passed in 2010, it made little headway in part because commissioners were sharply divided over the necessity of such a rule.

Clayton, however, has repeatedly emphasized its importance since taking on the chairmanship.

It's not clear what form a fiduciary rule may take under the SEC, though some industry insiders have raised the possibility of better regulating titles such as financial advisor and broker.

At the same time, several states, such as Nevada, have been considering promulgating their own fiduciary standards in an effort to ensure brokers are held to a high standard of care when providing investment advice.