A Maryland commission is recommending that a "fiduciary duty standard" be placed on broker-dealers and insurance agents doing business in the state.
The Maryland Financial Consumer Protection Commission released its report last week, the second report in its two years of existence. The latest effort touches on several areas on consumer protection, including data breaches and auto lending.
But it's the section on fiduciary duty that has the financial services industry most concerned. The commission cited the failure to enact financial regulations by state and federal officials as reasons to get tough on brokers and agents.
"Since (the) SEC and the state insurance regulators have proposed standards that largely preserve the status quo, individual states may need to provide greater protections that investors expect from financial professionals who provide investment advice," the report reads.
The National Association of Insurance Commissioners has been trying to do that for the past year, but its best-interest model law is bogged down in disagreement between conservative and liberal state officials.
What many in the industry fear is each state producing their own independent regulations that are all different in some way. Nevada was the first state to pass increased standards. New York is on track to enact rules later this year placing all life insurance and annuity sales under a best interest standard.
The expectation is that the Maryland will follow with a bill based on the commission recommendations very soon, said Andrew Remo, legislative affairs director for the American Retirement Association.
State Sen. James Rosapepe, D, introduced a bill extending the fiduciary duty standard last year, but parts of it were tabled after financial industry lobbyists raised concerns. A Rosapepe aide said the senator will soon introduce a bill based on the latest commission report.
The ARA was one of those groups that met with Rosapepe. The same concerns remain, Remo said.
In particular, the concern that any bill will be in conflict with the pre-emption clause in the Employee Retirement Income Security Act of 1974. Section 514 of ERISA provides that ERISA supersedes any and all state laws insofar as they relate to any employee benefit plan.
So far, Maryland officials have not shown "any sort of acknowledgement of the fact that ERISA advice is already subject to a federal fiduciary standard," Remo explained.
Other states are also writing bills that conflict with the pre-emption clause, Remo said. States such as Nevada and New Jersey are working on their own fiduciary or best-interest regulations.
“Ultimately, I think if states continue to ignore that, I think there’s a strong legal case to be made that there needs to be a carve-out here for ERISA plans,” Remo said.
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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