Thursday, 14 March 2019 12:47

State Fiduciary Rules May Be Illegal


In an eye-opening claim, both RIA and broker advocates are claiming that state level fiduciary rules may be illegal under federal law. Both the Investment Adviser Association (IAA) and SIFMA say that at least for RIAs, Nevada and other states’ fiduciary rules are illegal because of the 1996 National Securities Markets Improvement Act, which prohibits states from imposing additional rules on SEC-regulated advisors. The IAA said “For more than 20 years, federal law has prohibited states from adopting any rules, interpretations, or guidance that would have the effect of substantively regulating SEC-registered advisors. The IAA will engage with policymakers in any state that appears to be moving in that direction”.

FINSUM: A lot of the states’ fiduciary rules don’t just stop at brokers and extend to RIAs and insurance agents. This IAA argument seems like pretty strong grounds for a lawsuit to block any/all of these.

Published in Wealth Management

(New York)

Morgan Stanley just put a big threat on the table, and they are not alone. The bank says that it may withdraw wealth management services entirely from states considering new fiduciary rules, such as Nevada. Wells Fargo issued a similar threat. A number of states, including Nevada, New York, New Jersey, and Maryland, are considering making their own fiduciary rules. Such rules would be a major headache to the brokerage industry as they would create patchwork rules across the country. Morgan Stanley said bluntly “Absent substantial changes to the [state] proposal, Morgan Stanley will be unable to provide brokerage services to residents of the state of Nevada”. Edward Jones, TDA, and Charles Schwab also said they would need to at least pair back offerings.

FINSUM: This is a strong move by the brokerage industry but we do not think it will work. The political mood in the states mean lawmakers would rather say “good riddance” than back off, but time will tell.

Published in Wealth Management


The fiduciary rule has now been implemented across the country. The full version of the rule is not set to be enacted until January, but despite that, it looks as though there many more individual fiduciary rules on the way. That is because several states may be in various stages of creating their own fiduciary rules. Nevada just passed its own version of the rule, and it seems likely that other states will follow suit.

FINSUM: One hopes that each state will not pass its own fiduciary rule, as it would make compliance a whole lot more difficult than merely following one federal rule.

Published in Wealth Management

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