Dale Brown speaks at an FSI event in 2015.

Industry trade groups voiced their opposition Wednesday to legislation in Maryland that includes a measure to impose fiduciary obligations on brokers and advisors.

Panels in both of Maryland’s legislative chambers — the House Economic Matters Committee and the Senate Committee on Finance — held simultaneous hearings Wednesday in Annapolis on the Financial Consumer Protection Act of 2019.

In their testimony before the committees, the Securities Industry and Financial Markets Association, the Financial Services Institute, the National Association of Insurance and Financial Advisors and the Insured Retirement Institute voiced opposition to the state’s fiduciary legislation, stating it contributes to a “patchwork” of state best-interest rules.

The groups urged the Maryland lawmakers to wait on the Securities and Exchange Commission’s upcoming Regulation Best Interest as it will set a federal standard, and is expected to be finalized by the end of summer.

The House Financial Services Subcommittee on Investor Protection, Entrepreneurship and Capital Markets, chaired by Rep. Carolyn Maloney, D-N.Y., has scheduled a Thursday hearing on Reg BI.

Lisa Bleier, SIFMA’s managing director and associate general counsel, stated that the trade group “has publicly advocated for a heightened standard of conduct for broker-dealers for over 10 years,” and that “it is important that any heightened standard of conduct apply uniformly nationwide and not be limited to specific accounts or products.”

For these reasons, she said, “SIFMA strongly supports SEC efforts to establish a best-interest standard for broker-dealers and has serious concerns about any state-specific duties.”

The SEC’s Reg BI “will uniformly apply to investment advice provided on all products in all accounts nationwide,” Bleier said. “Maryland should await the conclusion of the SEC’s federal rulemaking process, which is expected to occur by the end of the summer.”

Dale Brown, president and CEO of the Financial Services Institute, told senators that “we have serious concerns” about the Maryland fiduciary provision. “First, the provision would significantly drive up compliance costs for firms; at some point those costs have to be passed on to investors, and at some point that potentially prices the access and choice of advice out of the reach of Main Street Americans.”

FSI “would ask you to wait on your provision to see what the SEC does in finalizing Regulation Best Interest,” Brown said.

NAIFA President Brian Jolles noted the SEC as well as the National Association of Insurance Commissioners are both working on standard of care proposals “that would have broad, national applicability.”

“In the interests of uniformity and consistency,” Jolles said, “states should put their efforts in these areas on hold until the SEC and NAIC have completed their work.”

Jason Berkowitz, IRI’s chief legal and regulatory affairs officer, testified that consumers in Maryland “will have less access to professional financial advice, insurance products and investment products” under the legislation.

“We’re not asking Maryland to stand down,” Berkowitz said, but to help with a nationwide solution.

Gary Gensler, former head of the Commodity Futures Trading Commission and chairman of the Maryland Financial Consumer Protection Commission, which recommended pursuing a fiduciary law, told state senators that “If you don’t broaden the fiduciary duty to cover broker-dealers … if that’s not going to be the law, I would at least on the investment advisors that are already covered by fiduciary duty, raise that standard to the national standard, so it’s consistent.”

— Check out Maryland’s ‘Sweeping’ Fiduciary Bill Puts Advisors Under More Stringent Standard on ThinkAdvisor.