New Jersey is moving forward with rules that would impose on brokers a more stringent fiduciary standard for investment advice.

On Monday, the state’s Bureau of Securities announced that it will put into place a regulation creating a unified fiduciary standard for anyone providing investment recommendations, fleshing out expectations for financial advisors as well as brokers.

“The bureau believes that the proposed new rule is necessary to ensure that persons involved in the securities markets are uniformly held to a high standard in their dealings with the general public and is necessary to ensure the welfare of New Jersey investors,” wrote the agency in proposing the rule. “Moreover, the proposed new rule will establish a uniform standard for financial professionals and rectify investor confusion that results from the lack of uniformity.”

Since the agency already held a 60-day comment period for the proposed rule last year, no further comment period is required and the final rule will go into effect 90 days after its proposal at the earliest—meaning New Jersey’s unified fiduciary standard could be in place and enforced as soon as mid-July.

In late 2018, New Jersey sought out comments on the proposal, intended as a response to the U.S. Securities and Exchange Commission’s proposed Regulation Best Interest, which state regulators argue “does not provide sufficient protections for New Jersey investors.”

The comment period for that rule ended on December 14, at which time the state’s Bureau of Securities said that a revised proposal would be made public in 60 to 90 days.

The new rule requires that brokers make recommendations without regard to their own or their company’s interests, financial or otherwise, and mandates that merely disclosing a potential conflict of interest is not enough to comply with the rule.

 

Brokers would be required to recommend the “best of the reasonably available options” when opening accounts, transferring assets, suggesting an investment strategy or recommending that clients buy investments and products.

Failure to adhere to a fiduciary standard for investment advice would be considered a “dishonest or unethical business practice” under the new regulation.

While the New Jersey Bureau of Securities acknowledged that the new regulation will have an impact on brokers, that impact should be tempered somewhat because “to the extent broker-dealers have already implemented changes to comply with the now vacated DOL Fiduciary Rule, the economic impact associated with the bureau's proposed new rule will be reduced,” the bureau stated.

Any additional costs to financial advisors, however, are “outweighed” by the need to protect investors, according to the agency.

More stringent fiduciary regulations have also been proposed and/or enacted in Nevada, Maryland, New York and Illinois.