Skyline of Newark, where the New Jersey Bureau of Securities is located.

Supporters and opponents of New Jersey’s fiduciary plan went toe to toe Monday as the state’s securities bureau held its second hearing on the plan.

New Jersey’s insistence on moving ahead with its own fiduciary rule “suggests an impatience and disregard” for how the Securities and Exchange Commission finalizes its advice standards package, specifically Regulation Best Interest, according to attorney George Michael Gerstein of Stradley Ronon in Washington.

The state’s securities bureau, which announced in mid-September that it was releasing a pre-proposal to impose a fiduciary duty on all New Jersey investment professionals, requiring them to place their clients’ interests above their own when recommending investments, held its second hearing on the plan Monday.

Knut Rostad, president of the Institute for the Fiduciary Standard, who testified at the hearing, told reporters on a Monday afternoon phone call that New Jersey and other states are moving ahead with their own fiduciary plans because there’s “not a great deal of confidence” in the finalized Reg BI.

The SEC, Rostad said, “has made clear that they are moving in a very specific direction with Reg BI.”

Gerstein, who did not testify on Monday, countered in an email to ThinkAdvisor that the timing of New Jersey’s “potential rulemaking concerns many.”

Other states, Gerstein continued, “seem unwilling to wait and see how the SEC incorporates the concerns and comments raised to the SEC in respect of Regulation Best Interest and the rest of the [advice] proposal.”

However, Gerstein expects that “the ultimate process taken by New Jersey and other states will take into account” a final Reg BI, as well as title reform and the Form CRS Relationship Summary, before “fully promulgating their own rule changes.”

New Jersey is taking comments on its pre-proposal until Dec. 14. Once the bureau reviews those comments and considers them, it will release a formal proposal for 60 to 90 days, Rostad explained, adding that the bureau gave no time frame for when the proposal would be released for comment.

What’s interesting about New Jersey’s plan is that it is “purely” being done by the executive branch, and “doesn’t have to go through the [state] Legislature,” Rostad said.

Rostad testified Monday that Reg BI has “no best-interest definition; no concrete guidance on policies and procedures to address conflicts.” Broker-dealers, he said, “have wide latitude to continue to do under RBI what they do now. As a result, ambiguity in Form CRS makes it incomprehensible, according to investors’ comments in the SEC roundtables.”

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