SIFMA as part of a joint industry letter provides comments to the Nevada Secretary of State’s Office in response to the…
March 1, 2019
Via email to: [email protected]
Ms. Diana Foley
Nevada Secretary of State’s Office, Securities Division
2250 Las Vegas Boulevard North, Suite 400
North Las Vegas, Nevada 89030
Re: Proposed regulations re: Nevada Revised Statutes (“NRS”) 90.575, 628A.010 and 628A.020 (January 18, 2019), as modified by Nevada Senate Bill No. 383 (“SB 383”)
Dear Ms. Foley:
The Securities Industry and Financial Markets Association (“SIFMA”) appreciates the opportunity to comment on the above-captioned proposed regulations (the “Proposal”). SIFMA represents the interests of more than 340 broker-dealers (“BDs”), investment advisers (“IAs”), and asset managers operating in the U.S. and global capital markets. Many of our members do business and serve retail investors in the state of Nevada.
SIFMA supports strong, substantive conduct standards for BDs and IAs to enhance investor protection, while at the same time preserving investor access to transaction-based advice and a variety of investment products. For that reason, we have supported the efforts of the U.S. Securities and Exchange Commission (“SEC”) to develop and finalize comprehensive federal regulations that will meaningfully raise the bar for BDs when providing personalized investment advice about securities to retail customers. We expect that the SEC will finalize and publish its Regulation Best Interest rules this year.
The most reasonable approach to protect investors and avoid investor confusion is to allow the SEC – the primary federal securities regulatory agency – to promulgate a uniform, nationwide, heightened, best interest standard of conduct for BDs. A state-by-state approach would result in an uneven patchwork of laws that would be duplicative of, different than, and/or in conflict with federal standards. It would also introduce a new level of investor confusion, which would undercut not only the new, uniform federal standard, but also the interest of investor protection generally.
A state-by-state approach also runs a significant risk of imposing regulations that are sufficiently costly, burdensome and/or difficult if not impossible to operationalize such that firms would be strongly incentivized to: (i) migrate brokerage accounts to fee-based accounts (Though such moves may be appropriate, they may ultimately be more costly for certain investors.); (ii) scale back brokerage services to execution only (i.e., do not provide brokerage advice); (iii) raise prices to cover their higher costs; and/or (iv) discontinue service to BD accounts altogether.
The Proposal, as currently drafted, would create these same incentives. As a result, many Nevada investors would likely suffer the loss of access to brokerage accounts and equally important, the loss of access to advice from BDs. The ability to receive advice incidental to brokerage services as permitted by SEC rules is often more appropriate for, among others, smaller investors, for whom a brokerage account is usually more economical, as well as investors who generally buy and hold and do not need or want to trade frequently, or who do not want to pay for ongoing advice and monitoring through an advisory account. In addition, many of these same investors, particularly smaller investors, would not qualify for fee-based accounts, and so would lose access to advice altogether.6 Nevada should affirmatively avoid creating these incentives and the unintended negative consequences that will likely follow.
For all the foregoing reasons, we appreciate the opportunity to participate in your regulatory process. We respectfully offer the following comments and recommendations on the Proposal, which we hope you find informative and helpful.