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October 25, 2018 at 09:48 AM
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.
