Massachusetts Enacts Fiduciary Rules For All Financial Advice

Massachusetts Secretary of the Commonwealth William F. Galvin has finalized regulations which "will impose a true fiduciary conduct standard in Massachusetts."

The new regulations, which will go into effect on March 6, will require broker-dealers and broker-dealer agents to provide investment advice and recommendations without regard to the interests of anyone but the customer, the secretary announced in a news release today.

Two comment periods produced changes to the final regulations, Galvin said. He outlined those changes in a release today.

The regulations will be enforced starting Sept. 1, 2020 for anyone doing business in Massachusetts.

“Since the SEC has failed to enact a meaningful conduct rule to protect working families from abusive practices in the brokerage industry, it has been left to my office to apply a real fiduciary standard on broker-dealers and agents in Massachusetts,” Galvin said. “Enacting this rule will provide stronger protections for Massachusetts investors, by imposing a heightened duty of care and loyalty on broker-dealers and agents.

“This standard will protect Massachusetts retirees and their hard-earned retirement savings from conflicted investment advice, which has been shown to cost investors billions of dollars each year,” Galvin said.

Comment Periods

Galvin's office held two comment periods -- receiving 53 comments from June 14-July 26, 2019 and 682 comments from Dec. 13, 2019-Jan. 7, 2020. As the regulation progressed, industry trade associations rallied opposition, including Gov. Charlie Baker, who submitted a letter of opposition.

The Republican governor is to the right of Galvin, a Democrat. The offices are independently elected positions.

Among the provisions included in the new regulations is a prohibition on all sales contests, which Galvin’s office has identified as a repeated cause of harm to investors. The rule goes beyond the SEC’s regulations, which bans only those contests which are product-specific or limited to particular securities in particular time periods.

A version of the new regulations was originally made public by Galvin’s Securities Division in July of 2019, when the Division held a preliminary comment period on draft regulations.

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.

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InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.