New Jersey Pursues Fiduciary Standard For Brokers

From Staff and Wire Reports

New Jersey regulators followed through on a vow to tighten fiduciary standards on brokers Monday, releasing its controversial regulation ahead of the Securities and Exchange Commission.

The New Jersey Bureau of Securities' proposal would hold all brokers to a fiduciary duty, a much tougher standard than the existing suitability requirement. The SEC is still tinkering with its rule.

“Investors remain without adequate protection from broker-dealers who, under the suitability standard, are permitted to consider their own interests ahead of their client’s interests,” the New Jersey proposal reads.

The bureau accepted comments on the pre-proposal through Dec. 14, 2018 and held two conferences in Newark.

The Insured Retirement Institute issued a statement on the New Jersey rule:

"The Insured Retirement Institute (IRI) will carefully review New Jersey's proposed fiduciary standard of conduct to be imposed upon financial services professionals. Upon review, we will file comments on the proposal in accordance with the Bureau of Securities' rulemaking process," said Jason Berkowitz, IRI Chief Legal and Regulatory Affairs Officer.

He continued, "IRI's preference is for states to engage in the current U.S. Securities and Exchange Commission (SEC) process to establish Regulation Best Interest and the National Association of Insurance Commissioners' ongoing efforts to update its model suitability law.

Collective input by all interested parties can ensure that investors make informed decisions about the type of financial professional that would best meet their needs while preserving investors' choice and access to the products and services they need to achieve their financial goals.

New Jersey's decision to move ahead without waiting for the SEC to conclude its rulemaking process introduces substantial opportunity for confusion as insurers, broker-dealers and financial advisors may face competing and potentially conflicting guidelines to provide important financial advice to clients.

Consumers also may suffer consequences if the new rule results in fewer advisors, higher compliance costs that imperil smaller broker-dealer or financial advice firms, advisors less likely to take clients with moderate investment funds, and less product innovation and reduced availability of lifetime income products.

IRI will continue to work with New Jersey regulators to minimize the potentially substantial unintended consequences of its decision to advance this regulation. A growing patchwork of differing state fiduciary regulations unfortunately may reduce access to qualified financial advice or many Americans, particularly those of moderate income who may most need expert advice to shape an effective retirement savings plan."