Maryland jumps into fiduciary fray with legislation requiring brokers to act in best interests of clients

Legislation requires brokers to act in the best interests of clients.
FEB 21, 2018

Brokers in Maryland would have to act in the best interests of their clients under a Senate bill making its way through the state legislature. Maryland investment advisers currently must meet such a fiduciary requirement. The provision that extends fiduciary duty to brokers is part of a larger bill, the Financial Consumer Protection Act of 2018, that will be the focus of a Feb. 22 hearing of the Maryland Senate Finance Committee. The legislation, which implements the recommendations of the Maryland Financial Consumer Protection Commission, also includes provisions related to consumer borrowing and student loans. The bill's primary sponsor, Sen. James Rosapepe, D-College Park, said that it is designed to preserve financial reforms that were put in place following the financial crisis of 2008-09. He cited the Labor Department's fiduciary rule as one that is now being threatened. That regulation was partially implemented last June, but the remaining provisions are being reassessed in a review mandated by President Donald J. Trump that could result in major changes. "In Maryland, we're trying to do our part to protect our citizens from financial abuses," Mr. Rosapepe said. The Financial Services Institute, which represents independent broker-dealers and financial advisers, opposes the fiduciary-duty provision of the Senate bill and was able to get it removed from the House version of the legislation. In a Feb. 16 letter to the leaders of the House Economic Matters Committee, FSI executive vice president and general counsel David Bellaire said that states should hold off on passing their own fiduciary laws and let the Securities and Exchange Commission take the lead. The SEC has indicated that it will propose a fiduciary-duty rule for retail investment advice this year. "Individual state legislation on this issue will lead to duplicative regulation, investor confusion, legal conflicts and compliance challenges without providing additional investor protection benefits," Mr. Bellaire said in a statement. "The proposed Senate bill would ultimately limit investor access to affordable, professional financial advice and education through excessive cost and compliance burdens." The Maryland commission asserted that extending fiduciary duty to brokers "better aligns the duties of all financial advisors, ensuring that they all give advice in the best interests of investors," a summary of the consumer protection bill states. "Such a fiduciary duty further protects investors from possible predatory practices and provides recourse to investors who may be ill-advised by a financial professional." Maryland is the latest state to jump into the fiduciary fray. Last week, Massachusetts filed an enforcement action against Scottrade Inc. based upon the broker's alleged violation of the DOL rule. A bill recently introduced in the New Jersey legislature would require non-fiduciary advisers to make a declaration of that status to clients. Nevada is working on regulations to implement a fiduciary-duty law enacted last year. So far, the fiduciary issue has mostly Democratic participants in Maryland. All 28 sponsors of the Senate bill are Democrats, as are 15 of the 16 sponsors of the House bill. Mr. Rosapepe isn't sure whether he'll get Republican support. "This isn't a partisan issue," he said. "This is about protecting people's retirement savings."

Latest News

SEC bars ex-broker who sold clients phony private equity fund
SEC bars ex-broker who sold clients phony private equity fund

Rajesh Markan earlier this year pleaded guilty to one count of criminal fraud related to his sale of fake investments to 10 clients totaling $2.9 million.

The key to attracting and retaining the next generation of advisors? Client-focused training
The key to attracting and retaining the next generation of advisors? Client-focused training

From building trust to steering through emotions and responding to client challenges, new advisors need human skills to shape the future of the advice industry.

Chuck Roberts, ex-star at Stifel, barred from the securities industry
Chuck Roberts, ex-star at Stifel, barred from the securities industry

"The outcome is correct, but it's disappointing that FINRA had ample opportunity to investigate the merits of clients' allegations in these claims, including the testimony in the three investor arbitrations with hearings," Jeff Erez, a plaintiff's attorney representing a large portion of the Stifel clients, said.

SEC to weigh ‘innovation exception’ tied to crypto, Atkins says
SEC to weigh ‘innovation exception’ tied to crypto, Atkins says

Chair also praised the passage of stablecoin legislation this week.

Brooklyn-based Maridea snaps up former LPL affiliate to expand in the Midwest
Brooklyn-based Maridea snaps up former LPL affiliate to expand in the Midwest

Maridea Wealth Management's deal in Chicago, Illinois is its first after securing a strategic investment in April.

SPONSORED How advisors can build for high-net-worth complexity

Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.