Newark skyline.

New Jersey plans on instituting its own fiduciary rule for broker-dealers operating in the state.

The plan “would impose a fiduciary duty on all New Jersey investment professionals, requiring them to place their clients’ interests above their own when recommending investments,” according to a press release from Gov. Phil Murphy’s office.

The rule is being developed by the New Jersey Bureau of Securities, which has the authority to impose a uniform fiduciary standard through regulation. Legislative approval would not be required.

The bureau is expected to publish what it calls a “pre-proposal” in the New Jersey Register Oct. 15, allowing for 60 days of public comment. During that time, it will also hold two informal conferences to solicit public comment — on Nov. 2 and Nov. 19 — in Newark, at the Division of Consumer Affairs which includes the Bureau of Securities, says Lisa Coryell, a spokeswoman at the New Jersey Attorney General’s Office, which presides over the Division of Consumer Affairs.

The garden state is undertaking this rulemaking because “the roles, duties and obligations of investment advisers and broker-dealers are confusing to investors under current federal regulations,” said Christopher W. Gerold, chief of the New Jersey Bureau of Securities, in the press release.

The release notes that most investors assume all financial professionals are required to provide unbiased advice when under current federal standards, only investment advisers and their representatives have a fiduciary duty to put their clients’ interests first,  not broker-dealers.

The SEC rule, which has yet to be finalized, “would be a higher standard of conduct than the current suitability standard required for broker-dealers, but would still fall short of protecting investors as much as a uniform fiduciary standard would,” according to the press release.

New Jersey is not the only state working on a state fiduciary rule, but it would be among the first to implement one. Several states have advanced legislation to create a fiduciary standard including Maryland, Connecticut and New York. Nevada has even passed a law, but its regulations for full implementation are reportedly still being written.

“Some states are getting into the act because the federal government has effectively stepped back from the DOL rule and is letting the SEC take the lead,” said Marcia Wagner, managing director of The Wagner Law Group, which specializes in ERISA and employee benefits law.

But Rob Foregger, co-founder of Next Capital, says, “Once a handful of these large states have enacted state-level fiduciary standards, the pressure to enact a federal fiduciary standard across the RIA and brokerage industry will become immense. … The SEC will have extraordinary pressure to revisit the best-interest proposal in its current form and also build in a mechanism to transition towards a unified fiduciary standard over the coming 48 months.”