Maryland has introduced legislation that would require both brokers and insurance agents to act as fiduciaries—a move that puts the state well in front of the best-interest advice standard the Securities and Exchange Commission has proposed.

The Financial Consumer Protection Act of 2019 makes both brokers and insurance agents fiduciaries with “a duty to act in the best interest of the customer without regard to the financial or other interest of the person or firm providing the advice.”

Registered investment advisors are included in the standard, but already operate as fiduciaries.

Maryland isn’t the first state to take such an action. Nevada, New Jersey and Washington are advancing their own fiduciary regulations, meaning industry lobbyists and consumer advocates are in for a busy 2019.

As with other state and federal proposals that would create a blanket fiduciary rule for all advisors, consumer groups are lining up in support, and industry groups are lobbying against approval.

“Ultimately, our preference is for a strong federal standard, so that the citizens in all states benefit,” says Barbara Roper, director of investor protection at the Consumer Federation of America. “But, so far, we haven’t been offered a federal standard that meets that test. If the SEC doesn’t strengthen its standard, we will be looking to states to fill that gap.”

The biggest impediment to a stronger SEC standard has been brokerage industry opposition, Roper says. “If SIFMA and others start to realize that their intransigent opposition to a strong standard at the federal level is going to result in state actions, maybe they’ll be more willing to support a federal standard that actually strengthens protections for investors.”

As expected, industry opposition to the bill was immediate, with some lobbyists saying Maryland’s rule could create significant regulatory challenges for brokers, agents and their firms that serve clients in multiple states.

“We aren’t questioning the intent behind these proposals,” says Dale Brown, CEO of the Financial Services Institute (FSI), which represents independent broker-dealers. “We’re questioning the wisdom of a state-by-state, nonuniform approach. That’s why we’re actively supporting a new uniform federal best interest standard. Most financial advisors, whether they’re FSI members who are dually registered and operate under Finra and SEC rules, or are RIAs only, serve investors in multiple states.”

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