State Fiduciary Laws Still Duplicative: ARA’s Wielobob, Remo

Efforts by proponents to carve out an exemption to a Nevada state fiduciary law for ERISA-covered retirement plan advisors continued this week, with the American Retirement Association (ARA) submitting a letter supporting the exemption. 

Nevada State Senate Bill 383 (SB 383), effective July 1, 2017, imposed a statutory fiduciary duty on broker-dealers, sales representatives, investment advisers, and investment adviser representatives (IAR). 

ARA has long believed retirement plan advisors should be held to a fiduciary standard and supported efforts by the Department of Labor to broaden the definition of an ERISA fiduciary. Yet conflicts will arise between state law and fiduciary standards already in effect under ERISA. 

More specifically, legislation by individual states “without exemption of ERISA-covered plans will lead to duplicative regulation, investor confusion, legal conflicts, and compliance challenges” with no additional investor protection benefits, ARA General Counsel Allison Wielobob wrote.

ARA submitted the letter for comment as part of a scheduled hearing to discuss new, comprehensive securities regulation in Nevada, part of which is the fiduciary exemption. However, legislators cancelled the hearing due to an executive order issued by Governor Joe Lombardo freezing new regulations and requiring the review of existing regulations. 

“ERISA has wide-ranging exemption provisions, and some states are not as aware of that as others,” Wielobob said. “All of these investor protection efforts are laudable, but if ARA does not point to where ERISA conflicts could happen, there will be legal conflicts and compliance challenges down the road with no additional benefits as intended. If we address this on the way in, we can avoid these challenges after the fact.”

Deliberations in the Nevada legislature over SB 383 in 2017 described the experiences of retirement plan participants. Yet, examples cited by Nevada lawmakers did not involve retirement plans already subject to a fiduciary duty under ERISA. 

Members described an opportunity for Nevada “to take a stand against conflicted financial advice” where the federal government’s efforts had stalled, according to Wielobob.

“It was the intent of Congress in enacting ERISA to provide a uniform set of national rules and causes of action that Nevada should respect in promulgating regulations,” she added. 

While Nevada is the only state to date to pass a law requiring a fiduciary standard for financial professionals, New Jersey and Massachusetts undertook rulemaking efforts for the same purpose. Retirement plan advisors ERISA fiduciaries and used to operating under the standard, rendering state standards unnecessary. 

“We’ve worked on the Nevada issue for five years but were successful with the other two states,” Andrew Remo, ARA’s Director of Federal & State Legislative Affairs, explained. “Nevada Secretary of State’s Office of Securities Division was going to update the legislation and include model language from the North American Securities Administrators Association. That’s fine, but we’d like the ERISA carve-out clarified within it. Our philosophy applied; if you’re going to promulgate any fiduciary duty at the state level, we would need an ERISA carve-out because of preemption rules.”