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FSI Says ‘Costly’ N.J. Fiduciary Proposal Threatens Investors In State

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Originally posted on Financial Advisor Magazine by Tracey Longo.

The Financial Services Industry (FSI) reinforced its June threat that brokers would stop doing business in New Jersey if a sweeping fiduciary standard is passed by further blasting the proposal during a regulatory hearing on Wednesday.

Witnesses for and against the proposal testified in the morning hearing, with proponents urging the state to go ahead with the rule to make up for deficiencies in a conduct rule recently approved by the U.S. Securities and Exchange Commission.

It’s uncertain whether the broker-dealer industry and FSI, which represents 60% of all brokers in the country, can derail or weaken the proposal. Working against the industry lobbyists is that rule does not need N.J. lawmaker approval.

New Jersey Gov. Phil Murphy ordered the state Bureau of Securities to write the regulation requiring advisors and brokers offering retail advice in the state to adhere to a uniform fiduciary standard because, he said, the Securities and Exchange Commission’s new conduct standards, called Regulation Best Interest, do not “sufficiently protect New Jersey investors.”

…

“The state of the fiduciary standard in federal regulation is in major disrepair. Leadership from New Jersey and other states is timely and vital,” testified Knut Rostad, president of the Institute for the Fiducary Standard, according to a transcript provided by the institute.

“Reg BI is widely opposed outside Wall Street and Washington. … This additional risk puts even greater importance on New Jersey’s actions,” said Rostad.

“Now that it’s clear how utterly the SEC has failed to meaningfully improve investor protections in retail investment advice markets, the need for state action is stronger and clearer than ever,” Micah Hauptman, financial services counsel at the Consumer Federation of America, said in a written statement.

“The bureau is well within its authority and should proceed with this important rulemaking and provide the strong protections that New Jersey investors reasonably expect and desperately need, but are not being provided by the SEC,” he added.

Read the full article on FA Magazine.

Dan Moisand

 

Dan Moisand is a nationally recognized fiduciary fee-only financial planner, an Institute Real Fiduciary™ Advisor and Chair-elect of the CFP Board.

The Institute has enshrined the ‘Moisand Rule’ on fiduciary practices. It is basic and is more important today than ever: “You have to avoid conflicts. If I avoid a conflict, I don’t worry about it.”

Watch the video of Moisand speaking here.

Bob Veres

 

Bob Veres is a long term observer of financial planning. His Newsletter, “Inside information” Is a staple of leading planners. In the May edition he writes about fiduciary and the Institute.

"But a much bigger point is that the fiduciary standard—as Knut Rostad of the Institute for the Fiduciary Standard has pointed out—has been determined by the Supreme Court (1963 ruling) to be at the very heart of the Investment Advisers Act of 1940. It is the foundation of what it means to be an RIA registered with the SEC instead of a tipster or a tout."

- Bob Veres, Parting Thoughts ... The SEC's Own Compliance Culture