With more states pushing ahead with tough fiduciary initiatives to raise investment advice standards for brokers, lobbyists have increasingly been hoping the North American Securities Administrators Association would weigh into the battle with a uniform set of regulations.
But there are no plans in the works for a model regulation, said Bob Webster, a spokesman for NASAA, the membership organization of all 50 state securities commissioners.
NASAA President Mike Pieciak said in a November interview with Financial Advisor that NASAA has no plans to pursue a model rule related to standards of care. "That statement holds today,” Webster said.
In last year's interview, Pieciak opened the door to possible action by NASAA if the Security and Exchange Commission's best-interest proposal failed to win the necessary support. "If [the SEC proposal] is viewed by state regulators and legislators as not going far enough to deliver fiduciary standards to the broker-dealer community, I wouldn’t rule out” a proposal by NASAA, Pieciak said at the time.
“I think there is a benefit to having a national fiduciary standard and working with the SEC to get that, but states still have the responsibility to protect investors,” Pieciak added.
In staying above the fray, NASAA has decided to allow individual states to adopt their own conduct rules. Thus far, state proposals have all been far tougher than the SEC’s best-interest proposal, which does not apply a fiduciary standard of care to brokers or dually-licensed hybrid advisors, who represent the majority of the industry.
Maryland’s new bill, for instance, makes both brokers and insurance agents fiduciaries, just like RIAs, with a duty to serve a client's best interests. Nevada, New Jersey and Washington are also advancing their own fiduciary regulations.
Since almost all broker-dealers do business in multiple states, a tougher conduct rule in even a handful of states could have a domino effect on the way the industry and brokers themselves do business, forcing the industry and hybrid brokers to elevate their practices. There's also speculation that ougher state standards could compel companies and brokers to give up their Finra affiliation and swear off commissions.
“Will more and more firms say there is no point in retaining a brokerage license?” said Lisa Bleier, managing director and sssociate general counsel for federal government relations at SIFMA, which represents securities industry companies.
Bleier said SIFMA is prepared to battle against state fiduciary initiatives until the SEC finalizes its proposal, which SEC Chairman Jay Clayton said he expects to release by second quarter this year.