Morgan Stanley has threatened to cease offering brokerage services in Nevada as a result of the state's proposed fiduciary rule.
In a recent comment letter about the advice rule, the wirehouse said that parts of it were "far too narrow" for the firm to offer the state's investors brokerage services that were cost effective.
The current proposal would end Morgan Stanley's ability to work in retail brokerage in the state, according to the letter, which is dated March 1 and signed by the firm's managing director and general counsel, Anne Tennant.
"Absent substantial changes to the proposal, Morgan Stanley will be unable to provide brokerage services to the residents of the state of Nevada," according to Morgan Stanley's letter. "We hope to avoid this unfortunate result, which we believe is not what the Nevada legislature intended.
"We support strong conduct standards for broker-dealers and investment advisers that will protect investors, while at the same time preserve investor access to a variety of advice and service models," the letter states.
The Nevada Securities Division released the fiduciary proposal in January to implement a law enacted in 2017 that requires brokers to meet a fiduciary duty when working with their clients.
Comments by Morgan Stanley and other firms were reported on Tuesday by the website Law 360. Other firms, including Wells Fargo & Co., Charles Schwab & Co. Inc., Edward D. Jones & Co. and TD Ameritrade Inc., said in their comment letters they might cut back on investment options available in Nevada under the current advice rule, according to Law 360.
A spokeswoman for Morgan Stanley, Susan Siering, said the company had no further comment.
"Wells Fargo Advisors continues to believe retail investors deserve a best interest standard of conduct when receiving personalized investment advice," said spokeswoman Shea Leordeanu. "Given that the [Securities and Exchange Commission] continues work on the Regulation Best Interest, we believe that states should coordinate with that rule making package for a unified standard of care."
The SEC could release a final advice reform rule by early summer.
InvestmentNews reported at the start of the month that trade groups, including the Securities Industry and Financial Markets Association, the Financial Services Institute and the Investment Adviser Association told the state to back the proposed fiduciary rule in their comment letters. They argued that a state-level advice standard would conflict with federal securities laws.
But more than a dozen investor advocacy groups said Nevada has the authority to promulgate the regulation, which would require financial professionals in the state to act as fiduciaries.
In addition to Nevada, New Jersey is working on its own fiduciary rule and the Maryland legislature is considering legislation that would require all financial advisers in the state to be fiduciaries.