A U.S. circuit court struck down the Labor Department’s fiduciary rule, dealing a blow to the retirement-savings regulation that has been in partial effect since June.

In a split decision, the Fifth Circuit Court—which covers Texas, Louisiana and Mississippi—ruled that the Labor Department overreached by requiring brokers and others handling investors’ retirement savings to act in clients’ best interest. “The Rule is unreasonable,” the decision read, with the court finding fault in the department’s broadening of what is deemed...