Conferences on the rule, open to the public, will be held in Newark on Nov. 2 and 19.

New Jersey is moving ahead with a proposed state fiduciary rule that would affect all broker-dealers, agents, investment advisers and investment adviser representatives registered to do business in the state.

After Gov. Phil Murphy announced his intent for the state to develop “the strongest investor protections in the nation” last month, the state’s Bureau of Securities issued what it calls a preproposal for a fiduciary rule, asking for public comment.

(Related: New Jersey Plans Fiduciary Rule for Broker-Dealers)

The bureau is “considering making it a dishonest or unethical business practice” for broker-dealers and other investment professionals to not act as fiduciaries when recommending to clients “an investment strategy, or the purchase, sale or exchange of any security or securities, or providing investment advisory services to a customer,” according to the preproposal.

It recounts the failed Labor Department fiduciary proposal, which was shot down by a federal appeals court, and the SEC’s proposed best-interest regulation, which has not yet been finalized, noting that “investors remain without adequate protection from broker-dealers, who under the suitability standard are permitted to consider their own interests ahead of their client’s interest.”

Many investors also don’t understand the difference between investment advisors and broker dealers and their different standards of care, according to the preproposal, which would essentially amend the state’s securities rules to include a fiduciary standard for broker-dealers and other investment professionals.

“New Jersey has requested comments on the same types of issues that the SEC is attempting to address: to whom is the duty owed, what types of communications trigger the duty, what is the scope of the duty and what is its duration, say Marcia Wagner, founder of The Wagner Law Group, which specializes in ERISA and employee benefits law.

The New Jersey Bureau of Securities is accepting comments on its proposal at the New Jersey Division of Consumer Affairs website, through Dec. 14.

It has also scheduled two all-day conferences on Nov. 2 and Nov. 19 at the Newark, New Jersey, Office of Consumer Affairs. Members of the public and of “regulated communities” as well as securities industry representatives can offer their opinions on the preproposal at the conferences so long as they email or submit in writing to the consumer affairs division that they intend to speak.

Following the written comment period and public conferences the Bureau of Securities will publish its fiduciary proposal, which will again be subject to a 60-day comment period.

Wagner expects a final New Jersey fiduciary rule will likely reflect the same views as the last Labor fiduciary rule, although no exact language has been set.

If the SEC issues its final best-interest standard too, there will be two competing standards for New Jersey-based broker-dealers to follow, a matter that would intensify if other states follow New Jersey’s lead, says Wagner.

There would be “the problem of complying with diverse standards, and their clear preference is for a uniform national standard,” says Wagner.

The SEC has indicated it hopes to address the fiduciary rule by September 2019, the same time the Labor Department has also indicated it will address fiduciary options to respond the Appeals Court decision that essentially killed its own fiduciary rule.

Wagner expects “most states will wait to see what the final actions of the two federal agencies adopt as a final product before deciding whether it is necessary to take action and to what extent.”

She noted that many broker-dealers have already made changes to comply with the Labor fiduciary rule before it was killed, and those firms are somewhat prepared for what may come.

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