• It is premature for Massachusetts to declare Reg BI lacks sufficient protections for retail investors. “The Division should delay action for at least 18 months and then assess whether any further steps are necessary,” the trade groups said.
 
• Imposing an ongoing fiduciary duty on brokerage accounts would limit investor choice and access to products and services. This would be a major disservice to the many Massachusetts consumers who choose to hold such accounts today and who want to continue to receive episodic brokerage advice, the groups argued.
 
• The proposal would negatively impact the state’s municipal and corporate markets by restricting the ability for firms to conduct principal transactions with retail broker-dealer clients, which would impact the ability to efficiently satisfy retail investor demand for Massachusetts municipal and corporate offerings. This would likely depress Massachusetts issuers’ access to a broad retail investor base affecting the price of their securities while increasing the cost to such investors,” the groups assert.
 
• The proposal raises a variety of pre-emption and other legal issues. For example, The National Securities Markets Improvement Act (NSMIA) precludes states from imposing regulations on SEC-registered advisors, and limits state authority over these advisors’ representatives. NSMIA also precludes states from imposing new books and records requirements on broker-dealers and their representatives, yet broker-dealers would need to create substantial new records to document compliance with the rule. The investment advisory requirements on broker-dealers that would be imposed under the rule would be in conflict with both federal and state law, the groups maintain.

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