As death watches go, the vigil over the Labor Department's fiduciary rule has been a long one.
Back on March 15, the 5th Circuit Court of Appeals struck down the regulation in a 2-1 decision. The Department of Justice, on behalf of the DOL, declined to appeal the decision by the April 30 deadline.
Attempts by AARP and three states to intervene as the defendants were denied on two different occasions in May.
The court was originally supposed to issue a mandate by May 7 making the March 15 decision effective, but has not yet done so.
When a pope passes away, a Vatican official pounds on his chest three times. If he doesn't respond, he's officially declared dead. If someone were to pound the DOL rule's chest three times today, the regulation would at least give a weak cough.
The parts of the rule that were implemented almost a year ago — impartial conduct standards for brokers when working with clients in retirement accounts — are still operational until the 5th Circuit ruling becomes effective.
In the meantime, the DOL has reiterated its temporary non-enforcement policy, allowing brokers to use exemptions in the regulation without a contract as long as they make a good-faith effort to comply with the impartial conduct standards, such as acting in a client's best interests, charging reasonable fees and not making any misleading statements.
But what is the reason for the hold up on the mandate?
No one I've talked to — either on-the-record or on background — knows the answer. The court clerk's office would only say that the mandate "is still pending."
That leaves the field open for speculation. For instance, the court could be waiting to see whether DOJ appeals its decision to the Supreme Court. The deadline for that move is June 13.
It's unlikely that the Trump administration, which opposes the DOL rule and delayed its full implementation, would turn to the high court to save it. Besides, the DOL has ceded investment advice reform leadership to the Securities and Exchange Commission, which has a proposal out for public comment.
Or maybe 5th Circuit chief judge Carl Stewart is trying to get the full court to agree to reconsider the March 15 ruling. Mr. Stewart dissented in that decision as well as the decisions to deny the states and AARP intervenor status. But he supported a decision not to let the full court reconsider the ruling to deny intervention.
Or maybe this is just the way it goes in the sui generis U.S. legal system. Each circuit has its own personality. Maybe the 5th Circuit's slow walk of the mandate is no big deal.
"We're still expecting the court to vacate the rule shortly," said George Michael Gerstein, counsel at Stradley Ronon Stevens & Young.
While they're waiting, firms should be cognizant that the 1975 federal retirement law that was replaced by the DOL fiduciary rule could come back online. That regulation contains a multiple-step process for determining who is a fiduciary for retirement savers.
"Preparations to comply with the five-part test make sense," Mr. Gerstein said.
But the DOL's temporary non-enforcement policy means the fiduciary rule can still be used to claim exemptions for normally prohibited activities, such as selling commission-based products.
"That gives the industry an opportunity to be subject to two rules, and that can only happen in Washington," said Duane Thompson, senior policy analyst at Fi360, a fiduciary education, training and technology company. "Firms are well-advised to comply with the impartial conduct standards to be safe until we hear more from the DOL."
Who knows how long that will take. But now that I've filed this blog post, maybe we'll see movement. Anytime I write that nothing's happening on a topic, the story quickly gets overtaken by events.