With a final Regulation Best Interest in hand, trade groups are urging the New Jersey Bureau of Securities to embrace the Securities and Exchange Commission’s federal standard, so as not to create a patchwork of state rules.
New Jersey stops taking comments on its uniform fiduciary standard for broker-dealers and investment advisors Friday. On April 15, the state proposed its rule, which would require all investment professionals registered with the state’s Bureau of Securities to place the interests of their clients above their own when recommending securities or providing investment advice.
The bureau has stated that the purpose of its proposal is to “establish a uniform standard for financial professionals and rectify investor confusion that results from the lack of uniformity.”
A recent analysis by Groom Law Group said New Jersey’s plan “far exceeds” Reg BI as well as the Labor Department’s now defunct fiduciary rule.
In a Friday comment letter, the Financial Services Institute told the state bureau that it should reconsider the final Reg BI as it includes “significant changes.”
FSI also noted that there are “significant differences” between New Jersey’s proposed rule and the final Reg BI, which will lead to investor confusion.
“If the Bureau chooses to move forward with its proposal, FSI strongly encourages it to align its requirements with those of Regulation Best Interest,” FSI said.
Reg BI “provides a model for the types of disclosures that allow retail investors to make informed decisions about the services and products they choose,” FSI wrote. “FSI recommends that the Bureau consider aligning its proposal with Regulation Best Interest or alternatively providing that a broker-dealer’s substantial compliance with Regulation Best Interest would satisfy the requirements” under its plan.
FSI stated that the trade group is “confident that the [SEC] has achieved this goal through its most recent rulemaking package, which includes Regulation Best Interest, a best interest standard of conduct applicable to broker-dealers, and a separate interpretive guidance on the fiduciary duty applicable to investment advisers.”
The American Securities Association also urged New Jersey to adopt Reg BI.
“New Jersey should adopt the SEC’s national Reg BI standard and not create a patchwork of unworkable state regulations that would only cause confusion across the financial industry and harm New Jersey residents saving and investing for a better future,” said ASA CEO Chris Iacovella.
ASA, Iacovella wrote, believes the “standards laid out in the New Jersey Proposals directly undermine the consumer protections set forth in Reg BI’s national best interest standard. Adopting a different approach from the SECs national standard will confuse residents, financial professionals, and firms in New Jersey.”
Industry groups like Better Markets, the Consumer Federation of America and Fund Democracy, however, voiced support for New Jersey’s fiduciary plan.