Representatives of some of the regional firms questioned whether the biggest banks were withholding support for the suit for competitive reasons. They noted that complying with all of the new rules will be much costlier for smaller firms and could put some of them out of business.

Such concerns led a number of the smaller brokers to form a new trade group earlier this year called the American Securities Association. Its agenda is partly to differentiate regional brokerages from their Wall Street counterparts.

The smaller firms also argued that the big banks opposed the suit because they have shifted many of their customers into accounts that charge based on assets -- a setup that already requires putting clients’ interests first.

Suitability Standard

Smaller firms are much more reliant on the typical brokerage account where investors pay a commission for trading. Labor’s fiduciary rule upends that practice, replacing a standard that lets brokers recommend products they deem suitable, a lesser requirement.

On the other side, many larger firms were pleased that Labor’s final regulation pushed back full compliance to January 2018, one of several ways the department offered concessions in response to industry concerns.

Another issue some big banks had with the lawsuit was the potential for it to damage financial advisers’ reputations, the people said.

President Barack Obama personally touted the new protections, and some firms were reluctant to participate in a case that could be spun by opponents as anti-investor. The industry, they noted, has yet to recover from the public perception that fat-cat bankers helped bring on the financial crisis eight years ago.

Goldman Sachs

Not all of Sifma’s largest members took the same position on the case.