Joint Trades on the Fiduciary Duty of Broker-Dealers and Investment Advisers Proposed New Rule N.J.A.C.
Summary
SIFMA, Institute for Portfolio Alternatives (IPA), National Association for Fixed Annuities (NAFA), Small Business Investor Alliance (SBIA), U.S. Chamber of Commerce, Financial Services Institute (FSI), Insured Retirement Institute (IRI), Alternative & Direct Investment Securities Association (ADISA), American Securities Association (ASA), Money Management Institute (MMI), and NAIFA provided comments to the New Jersey Bureau of Securities regarding the Fiduciary Duty of Broker-Dealers and Investment Advisers Proposed New Rule N.J.A.C.
Excerpt
Christopher W. Gerold, Bureau Chief
New Jersey Bureau of Securities
153 Halsey Street, 6th Floor
PO Box 47029
Newark, New Jersey 07101
Re: Fiduciary Duty of Broker-Dealers and Investment Advisers (Proposal Number: PRN 2019044); Proposed New Rule N.J.A.C. 13:47A-6.41
Dear Mr. Gerold:
We the undersigned trade associations appreciate your continued engagement with the industry and the opportunity to comment on the proposed fiduciary duty regulations referenced above. We, as a group, represent a cross-section of the financial services industry and all of us have members serving retail investors in New Jersey. Many of us of have sent separate letters and would like to take this opportunity to highlight some key universal concerns applicable across all our membership.
Specifically, as you consider the comments and develop the Bureau of Securities’ final regulation, we encourage you to consider the following:
1. The Bureau should pause its process and reevaluate its Proposal in light of Reg BI.
On June 5, 2019, the SEC passed Reg BI, thereby creating a new, nationwide, heightened standard of conduct for BDs that are member firms of the Financial Industry Regulatory Authority (“FINRA”) or another SRO. Under Reg BI, a BD making a personalized recommendation to a retail customer in a brokerage account involving a securities transaction or an investment strategy must act in the client’s best interest, without placing its financial or other interest ahead of the client’s interest. That best interest obligation requires a BD to, among other things: (1) disclose all material facts about the scope and terms of the relationship and all material facts relating to conflicts of interest; (2) exercise diligence, care, and skill, including understanding the risks, reward and costs associated with a recommendation; and (3) mitigate under various circumstances, and eliminate in specific instances, conflicts of interest associated with the recommendation.