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February 21, 2020 at 10:53 AM
William Galvin, Massachusetts’ top securities regulator.
William Galvin, Massachusetts’ top securities regulator, said Friday that he has finalized the state’s fiduciary rule to impose “a true fiduciary conduct standard” in Massachusetts.
The new regulations, which take effect March 6, require broker-dealers and their agents to provide investment advice and recommendations “without regard to the interests of anyone but the customer.” A prominent consumer advocate, however, said the final rule had been weakened from the original version.
Enforcement of the regulations will start on Sept. 1.
“Since the SEC has failed to enact a meaningful conduct rule to protect working families from abusive practices in the brokerage industry, it has been left to my office to apply a real fiduciary standard on broker-dealers and agents in Massachusetts,” Galvin said Friday in a statement. “Enacting this rule will provide stronger protections for Massachusetts investors, by imposing a heightened duty of care and loyalty on broker-dealers and agents.”
Galvin added that the Massachusetts standard will protect retirees in the state and “their hard-earned retirement savings from conflicted investment advice, which has been shown to cost investors billions of dollars each year.”
The new rule also prohibits sales contests, which Galvin’s office has identified “as a repeated cause of harm to investors.”
The rule goes beyond the SEC’s Regulation Best Interest, which Galvin said “bans only those contests which are product-specific or limited to particular securities in particular time periods.”
George Michael Gerstein, co-chair of the Fiduciary Governance Group at Stradley Ronon in Washington, told ThinkAdvisor’s Human Capital podcast on Tuesday that Masschusetts would likely be the first state to finalize a fiduciary rule. “I’m assuming there will be litigation brought against [the Massachusetts rule] on pre-emption and other grounds,” Gerstein said. Other states “will wait to see how the litigation plays out” before moving ahead.
