State Of The Fiduciary: States Step In Where Federal Agencies Left Off  

While the Securities and Exchange Commission revises its rule-making package containing regulation best interest, Form CRS and title reform, several states are taking matters into their own hands, establishing a fiduciary standard in the hopes of better-protecting investors.

Nevada passed Senate Bill No. 383 last July, creating needed definitions of financial planners and broker-dealers. The law also requires that financial planners disclose any profit or commissions they stand to make should the client take their advice on a particular suggestion.

Since its enactment over a year ago, other states have started following Nevada’s example, creating their own standards where the federal standard lacks.

Connecticut, New York, New Jersey and Maryland all have passed or have proposed legislation that would establish fiduciary standards in each of the four states.

In Maryland, a financial reform bill was brought to the table by Democratic State Sen. James Rosapepe. Rosapepe’s bill leaves room for the SEC to create and adopt new legislation before it acts independently on the matter; a chance not given by the other fiduciary states.

Seeing the void created by the since-defeated DOL fiduciary rule, New York, also adopted a best interest standard that holds those selling annuities and life insurance to a standard of practice.

Most recently, New Jersey has proposed a fiduciary rule for all investment professionals, including investment advisers, IARs and broker-dealers.

New Jersey’s proposal is currently open to public comment through Dec. 14 for investors and professionals who would like to weigh in on the proposed bill.

There are also two roundtables (similar to the SEC roundtables about regulation best interest) scheduled to discuss the legislation on Nov. 2 and Nov. 19.

It remains to be seen if other states will follow the example set by these five states or if others will wait for a federal mandate from the SEC before proceeding with legislation.

AdvisorNews Managing Editor Cassie Miller may be reached at [email protected]. Cassie has an extensive background in magazine writing, editing and design. Follow her on Twitter @ANCassieM.