A sweeping fiduciary provision that would require Maryland investment advisors, brokers and insurance agents to act in clients’ best interest appears to have been successfully sidetracked for now by the bill's opponents, including the Financial Services Institute (FSI).

The Maryland House of Delegates removed the fiduciary provision from legislation earlier this month. Now FSI said it is turning its attention to killing an identical provision in the Maryland Senate, where lawmakers on the Senate Finance Committee on Thursday debated the bill, called the Financial Consumer Protection Act of 2018.

“We thank the Maryland House of [Delegates] for addressing our concerns and removing the fiduciary provision from its version of the Financial Consumer Protection Act of 2018, but our concerns still remain regarding the Maryland Senate’s version of the bill,” FSI EVP and General Counsel David Bellaire, told Financial Advisor in a statement.

Bellaire said that “FSI has long supported a federal uniform fiduciary standard of care for all retail financial advice. However, individual state legislation on this issue will lead to duplicative regulation, investor confusion, legal conflicts and compliance challenges without providing additional investor protection benefits.”

The bill would also would ultimately limit investor access to affordable, professional financial advice and education through excessive cost and compliance burdens, he said.

“We look forward to continuing to work with the Maryland Senate to address these concerns. FSI has long supported a federal uniform fiduciary standard of care for all retail financial advice,” added Bellaire, who said FSI currently has three broker-dealers and 562 financial advisors operating in the Maryland. FSI is a trade group representing independent broker-dealers.

The fiduciary language in the Maryland bill is sweeping. Sponsored by state Sen. James Rosapepe, it would define anyone who engages in the business of effecting transactions in securities in a client account—including advisors, brokers and agents—as a fiduciary “who has a duty to act primarily for the benefit of its clients.”

The bill would also require advisors and others to disclose, “at the time advice is given, any gain, profit or commission the person may receive if the advice is followed.” Additionally, the bill would require disclosure of legal and disciplinary events “material to an evaluation of the person’s integrity or ability to meet contractual commitments to clients.” The legislation further would require advisors and others to access the clients’ financial circumstances and obligations on an ongoing basis.

The legislation is being supported by Maryland’s Attorney General Brian Frosh, who told lawmakers at the Senate Finance Committee hearing that consumers need fiduciary protection to guard against abusive practices that aren’t covered by current law. “We know the Consumer Financial Protection Bureau is stepping back from enforcement and someone needs to pick up the slack,” said Frosh, who is also supporting the bill's increase in fines from $1,000 to $10,000. “We make money for the state,” added Frosh, who has successfully sued Moody’s and Deutsche Bank in the past year.

A Senate staffer who asked not to be identified said that the bill will be reintroduced if it fails in the Senate. He also noted, as did attorneys who testified, that the only area of the Maryland bill that duplicates or contradicts federal regulation involves disclosure and recordkeeping requirements on fiduciaries, which have been remedied by amendments.

The Consumer Federation of America is also supporting the Maryland fiduciary provision.

“To the extent the federal government does not protect investors from the harmful effects of conflicts of interest, it’s entirely appropriate for the states to step in and fill the void,” said CFA’s Financial Services Counsel Micah Hauptman. “If the states step in, it’s important that they get it right, and the DOL fiduciary rule provides the perfect model.”

“The Maryland commission put out a strong recommendation in this area,” added Barbara Roper, CFA director of investor protection. “The wording of the actual proposed statute will need to be cleaned up to achieve the intended goal.”

The legislation would implement provisions proposed by the Maryland Financial Protection Commission, which was formed to propose and preserve financial protections put in place by the Dodd-Frank Act, post market meltdown.

The bill is expected to come up for vote in the Senate Finance Committee the first week of March.

While the DOL proposed a fiduciary standard for advisors who work with qualified retirement assets, the effective date of important parts of the rule have been delayed until July 2019 to give the agency time for review, as directed by President Trump.

The SEC has indicated that it will propose a best-interest rule by the second half of this year.