In the race to get fiduciary rules on the books before the Securities and Exchange Commission finalizes its Regulation Best Interest, Nevada and New Jersey are two states that have a “strong desire” to push their regulations through “and hope they survive scrutiny,” said attorney George Michael Gerstein, co-chair of Stradley Ronon’s fiduciary governance group.
Unlike the Maryland fiduciary legislation that was torpedoed by the state’s Senate Finance Committee on April 4, New Jersey “doesn’t need votes, per se, just to follow their administrative law in promulgating a regulation and hoping it stands up in court,” Gerstein said.
The New Jersey Bureau of Securities followed through on its plan to create a uniform fiduciary standard for broker-dealers and investment advisors on April 15. The New Jersey plan, as Gerstein notes, “comes nearly three months to the day after Nevada proposed a similar fiduciary regulation.” New Jersey will take comments on its plan until June 14.
Stradley Ronon attorney William Mandia added that “Maryland’s rejection of the proposed fiduciary legislation is a sign that state legislatures are likely to take a wait-and-see approach until the SEC’s proposed Reg BI and the NAIC’s revisions to its model rule for suitability in annuity transactions are both finalized.”
However, Mandia continued, “The potential remains that a small number of states may take a different approach by using their regulatory agencies to create rules that heighten the standard of care similar to what New York’s Department of Financial Services did last year when it adopted Insurance Regulation 187.”
Nevada’s Legislature passed its own fiduciary statute for securities in 2017, but the law couldn’t be implemented until regulations were put into place. Nevada issued those proposed regs on Jan. 18, with a comment period that expired on March 1. Nevada is expected to hold a hearing on its fiduciary plan in the near future and has to provide notice 30 days before the hearing.