[UPDATED 12/04/19]
Secretary of the Commonwealth William F. Galvin, Massachusetts’ chief securities regulator, has signed off on new regulations that would impose a uniform fiduciary conduct standard in that state.
A hearing on the proposed regulations, which were filed with Galvin’s Publications & Regulations Division on Nov. 29, will be announced at a later date.
The proposed fiduciary conduct standard would apply to broker-dealers, agents, investment advisers and investment adviser representatives when dealing with their customers and clients in Massachusetts. According to a press release, it would “require financial professionals to treat their customers and clients with utmost care and loyalty.” Financial recommendations and advice would be required to be based on what is best for the customers and clients, without regard to the interests of the broker-dealer, advisory firm and its personnel. The conduct standard is based on the common law fiduciary duties of care and loyalty, according to Galvin’s office.
The proposed changes to existing regulations are expected to increase accountability in the financial industry and protect investors by subjecting investment advice to a true fiduciary standard. Municipalities and pension plans would receive the full protection of the heightened conduct standard, along with individual investors.
“I am proposing this standard because the SEC has failed to provide investors with the protections they need against conflicts of interest in the financial industry with its ‘Regulation Best Interest’ rule,” Galvin said.
The initiative was announced earlier this year, when Galvin solicited comments on the proposed approach, criticizing the SEC’s Reg BI.
[EDITOR'S NOTE: The original version of this post addressed whether the proposed rule applies to ERISA plans. For an update on that issue, click here.]
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