SIFMA: State-level fiduciary rules would confuse investors

Managing director Lisa Bleier set to testify in Nevada workshop on state's new fiduciary law

Oct 6, 2017 @ 12:00 pm

By Mark Schoeff Jr.

A major financial industry trade association is warning today that state-level fiduciary duty laws would confuse investors and financial advisers rather than deliver the protections envisioned by the measures.

In testimony today in Las Vegas, Lisa Bleier, managing director of public policy and advocacy for the Securities Industry and Financial Markets Association, plans to tell the Nevada secretary of state that the organization opposes Nevada's newly enacted fiduciary law.

"While SIFMA and the state of Nevada have similar objectives, we may disagree on the best way to achieve those objectives," Ms. Bleier states in prepared remarks for a rulemaking workshop. "We believe a uniform national standard is in everyone's best interest. We are concerned that a state by state approach would subject financial professionals and firms to a confusing and potentially contradictory array of requirements and further muddy the waters for consumers trying to determine their relationship with their broker."


Nevada is one of several states that has either approved or is considering its own laws to set investment-advice standards. They are acting as the Labor Department fiduciary rule, which applies to retirement accounts and was partially enacted in June, undergoes a review ordered by President Donald J. Trump that could lead to revisions. The Securities and Exchange Commission also is drafting its own fiduciary rule, Chairman Jay Clayton told lawmakers earlier this week.

The head of the state securities regulators organization earlier this week said that states should wait for things to shake out on the federal level before proceeding with their own investment-advice standards.

"I think states ought to hold up to see where we're going with this," Joe Borg, Alabama securities director and the new president of the North American Securities Administrators Association, said in an interview.


Ms. Bleier said that Nevada should not use the DOL rule, which requires brokers to act in the best interests of their clients, as the foundation for its own fiduciary law.

"Essentially, the DOL fiduciary is driving increased movement by firms and financial professionals to a fee-based business model, resulting in many lower and middle-market investors being without access to financial products and professional advice and services because of the nature and structure of the fee-based model," Ms. Bleier said.

This assertion was challenged on Thursday by advocates for the DOL rule, who say that it mitigates broker conflicts of interest that lead to the sale of high-fee investment products that erode savings.

"We cannot dismiss out of hand the possibility that some firms are using the rule as an excuse to shift customers into fee accounts, even when that is not the best option for the investor, or charging them unreasonable fees as a result," wrote Barbara Roper and Micah Hauptman, officials with the Consumer Federation of America, in an Oct. 3 letter to DOL Secretary Alexander Acosta. "If this is occurring, however, that reflects a fundamental enforcement failure on the part of the department and its fellow regulators at the [SEC] and Finra, not a problem with the rule itself."


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