Fiduciary Rule and Its Effect on Financial Professionals—Part IV: Individual State Rulings

A fiduciary rule proposed by the U.S. Department of Labor (DOL) in 2010, has left the industry in flux ever since. With the goal of protecting consumers from conflicting financial advice, the rule has been in debate since 2016. It has been phased in, withdrawn, voted on, vetoed, reviewed and revised. This series addresses the complexities of the rule and its effect on financial professionals.

See Part I, Part II and Part III of the series to get the full background on Fiduciary Rule.

Fiduciary Rule Today

On June 5, 2019, the SEC approved its investment advice reform package, Regulation Best Interest (Reg BI). The standards of conduct for investment advisors took effect on July 12, 2019, upon publication of the Regulations. The new requirements under Regulation Best Interest and the disclosure requirements on broker-dealers and investment advisors will take effect on September 10, 2019.

After years of uncertainty, it appears that regulations surrounding fiduciary work are slowly but surely being implemented, but will it be enough? Not for all, it appears.

On June 26, 2019, the House of Representatives blocked funding for Reg BI. However, it is expected to pass in the Senate.

Additionally, President Trump said he will nominate Eugene Scalia for Labor secretary, as Alexander Acosta’s replacement. Scalia was instrumental in killing the DOL’s version of Reg BI.

On top of it all, states continue to introduce their own rulings.

Individual State Rulings on Fiduciary Duties 

Individual states are also introducing their own rulings and more are expected to take the matter into their own hands, following the SEC ruling.

Maryland— Bill died in the legislature this past spring but could be revived.

Massachusetts—Working on a bill. Plan has been released for comments.

Nevada—Has passed a fiduciary bill and signed it into a law for broker-dealers in 2017. The law imposes a statutory fiduciary duty on broker-dealers and advisors to act in the best interest of their clients and comply with disclosure requirements. Nevada is also working on a fiduciary rule that was proposed in January 2019.

New Jersey— Has proposed a fiduciary rule for broker-dealers. The earliest possible enactment of the rule would be one year from the date of publishing, or April 15, 2020, though the final rule would likely be challenged in court.

New York— Legislators expected to revive a previous bill.

How to Handle Fiduciary Rule Uncertainty

With the consumer awareness and confusion surrounding fiduciary rule, RIAs, broker dealers and life agents need to act.

• Research the ruling
• Catch up on the backstory
• Meet Reg BI compliance guidelines
• Ensure your Errors & Omissions Insurance contains fiduciary coverage

An Errors & Omissions policy from Lockton Affinity Advisor contains fiduciary coverage automatically. This coverage meets ERISA standards, including services as an ERISA 3(21) and 3(38) advisor. It also ensures any fiduciary duties you perform are covered.

Don’t risk going without the right coverage. Contact Lockton Affinity Advisor to learn more about our E&O insurance with fiduciary coverage.