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States Are Stepping Up with Fiduciary Rules of Their Own

Meyer Wilson

With political battles aimed at dismantling federal fiduciary rules that govern broker-dealer advice to investors, some states are stepping up with their own fiduciary rules. New York, New Jersey, Connecticut, and Nevada have proposed regulations or passed laws requiring investment advisers to disclose conflicts of interests that may impact their clients' investments.

States Working to Protect Investors

In July 2017, lawmakers from Nevada approved a law extending a current fiduciary law to include all broker-dealers, financial planners, and commission-based investment representatives. The law also requires all profits and commissions generated from client investments to be disclosed. In four additional states, California, South Carolina, South Dakota, and Missouri, courts have imposed fiduciary standards on broker-dealers. Recently, the Maryland Senate approved legislation that instructs its state consumer protection agency to review the possibility of enacting a state fiduciary law. The National Association of Insurance Commissioners is also looking at ways to incorporate state regulations for annuity sales. Proposed state fiduciary laws do not fall under the federal benefits law or the Employee Retirement Income Security Act, and they do not impact employer-sponsored retirement plans.

The recently-tossed federal fiduciary rule would have required broker-dealers and financial advisers to act in the best interest of their clients when giving investment advice on retirement accounts. The rule was designed to protect investors by pushing them towards low-cost, low-risk index funds that are fee-based, rather than products that are commission-based. It discouraged high-cost, under-performing products like variable annuities and managed mutual funds. As a result of the current administration's efforts to toss the fiduciary rule, investors lost important protection for their retirement investments.

During the prior administration, when the DOL's federal fiduciary rules were written, research showed that middle-class families lost approximately $17 billion annually due to hidden fees and backdoor payments.

Investors who suffer financial losses due to investment misconduct or fraudulent actions by a broker or financial advisor, may be entitled to recover the purchase price of securities, expected gains lost to inappropriate investments, arbitration costs, or reasonable attorney's fees. In cases where egregious conduct is involved, an investor may be entitled to punitive damages as well. For claims assistance, contact Meyer Wilson at (888) 390-6491 for a free consultation.

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