The Securities and Exchange Commission’s proposed “best interest” rule “appears to be drafted to appease the broker-dealer industry and their lobbyists, protecting the industry’s best interests instead of the best interests of investors,” said William F. Galvin, the secretary of the commonwealth for Massachusetts, in a statement to the press.

Galvin has made national headlines since February by aggressively pursuing alleged fiduciary violations by brokers and advisors at Scottrade and Wells Fargo that he says have cost investors millions of dollars.

“The SEC is proposing a watered-down standard that simply restates current industry rules and allows certain dangerous conflicts to persist,” Galvin said of the new proposal.

“Among other problems, the rules do not prohibit conflicted actions and will provide support for recommendations of high-cost and proprietary investment products, where conflicts have been particularly harmful to retail investors.”

Galvin charged Scottrade in February with aggressive and improper sales tactics in the first such case in the country seeking fines, penalties and customer refunds for violations of the Department of Labor’s fiduciary rule. In March, he opened a high-profile investigation into Wells Fargo Advisors for unsuitable recommendations and rollovers and for the alleged “inappropriate” moving of brokerage account customers into advisory accounts.

While Galvin is an aggressive advocate of fiduciary standards, he’s not alone. Nine states have already either enacted fiduciary standards and heightened disclosure laws or are proposing them. Among the other states are Connecticut, Delaware, Illinois, Maryland, Nevada, New Jersey and New York.

It is uncertain whether the North American Securities Administrators Association (NASAA) will think the SEC’s package of three proposals go far enough to protect investors, but the group has long been an advocate of raising the bar for brokers’ sales practices. NASAA’s members are state securities regulators that create model laws for states to enact.

“NASAA has long supported raising the standard of care for broker-dealers when working with all investors,” the association’s president, Joseph Borg, told Financial Advisor. “When it comes to financial professionals who provide investment advice, regardless of their title, all should be bound to a standard that requires them to put their clients’ interests ahead of their own. We look forward to reviewing the SEC’s proposed “Regulation Best Interest” and providing our comments to the commission.”

Galvin isn’t waiting. “How difficult would it have been to ban sales contests, which have been shown time and time again to promote horrific conflicted advice? Your life savings should not be used by brokers to win a trip to Bermuda,” said Galvin, who cited Scottrade’s sales contests in his suit against the BD.

Further, the Massachusetts regulator said that the SEC erred by allowing B-Ds to modify the best interest standards via contract provisions. Such fine print disclosures are exactly the wrong way to set the standard for dealing with retail investors, he maintained.

“The rules conspicuously move away from true fiduciary principles by relying on a legalistic “relationship summary” document that is intended to describe the parameters of the relationship between the broker-dealer and the retail customer. This is a key indication that the SEC has backed away from a clear fiduciary duty for broker-dealers,” Galvin said.

The fact that the SEC does not define “best interest,” is another glaring error, he said. “This ambiguity will lay the groundwork for the same debates and litigation that exist today under the ‘suitability’ standard that applies to broker-dealers.

“Ongoing harm to retail investors and particularly investment investors, who have suffered significant losses as a result of brokers’ conflicted advice, should have motivated the SEC to come up with a standard that is enforceable by regulators and investors,” Galvin said.

“The needs of everyday investors should have been the guiding factor for this rule-making, but the SEC has fallen short by proposing a standard that will preserve some of the most problematic practices in the brokerage business,” he added.