The Maryland Senate Finance Committee will hold a hearing on Thursday afternoon regarding legislation, S.B. 1068, the Financial Consumer Protection Act of 2018, that includes provisions to classify broker-dealers and investment advisors as fiduciaries.
That state’s House also introduced companion legislation, H.B. 1634, but the Financial Services Institute says that it has “worked with both sponsors to amend the bill to remove the fiduciary provisions.”
FSI also submitted letters of opposition to the Maryland legislature, attended the House Economic Matters Committee meeting on Feb. 16 and followed up with Senators to discuss FSI’s concerns on the Senate bill, “including investor confusion created by various standards set by state and federal regulators.”
David Bellaire, FSI’s executive vice president and general counsel, said in an emailed statement to ThinkAdvisor that FSI has “long supported a federal uniform fiduciary standard of care for all retail financial advice. However, individual state legislation on this issue will lead to duplicative regulation, investor confusion, legal conflicts and compliance challenges without providing additional investor protection benefits.”
The proposed Senate bill in Maryland “would ultimately limit investor access to affordable, professional financial advice and education through excessive cost and compliance burdens,” Bellaire said. “We look forward to continuing to work with the Maryland Senate to address these concerns.”
The Senate and House bills’ fiduciary provisions are the same and create a fiduciary status for broker-dealers, agents and investment advisors. Those persons, under the bills, have a “duty to care primarily for the benefit of [their] clients.” The measure requires disclosures of compensation and any material legal or disciplinary events, and requires inquiry of the financial circumstances and obligations of the client, both initially and at subsequent contacts.
Andy Wagner, a state legislative policy analyst for Multistate Associates, who specializes in consumer finance legislation, told ThinkAdvisor that staffers of Sen. James Carew Rosapepe, a Democrat, who sponsored the bill, “have been communicating with the General Assembly and sponsor of H.B. 1634, and will likely agree to strike the same fiduciary provision at [today’s] committee hearing.”
The Maryland fiduciary bills “will move to subcommittee and continue to be amended, but for now the fiduciary provisions seem to be off the table.”