William Galvin, Massachusetts’ top securities regulator,
stands ready to defend the state’s fiduciary rule as he begins to enforce the
rule Tuesday.
“My office was the first and currently the only state to
adopt a fiduciary rule for broker-dealers,” Galvin told ThinkAdvisor in a
Monday email. “I intend to police this area to ensure that its important
obligations are being met by industry. If challenged, my office is ready to
defend this rule to the full extent of the law to protect Massachusetts’
investors against breaches of fiduciary duty and conflicts of interest.”
Galvin announced in late February that he had finalized the
state’s fiduciary rule to impose “a true fiduciary conduct standard” in
Massachusetts.
The new regulations took effect on March 6 but the
enforcement date begins on Tuesday. The rule requires broker-dealers and their
agents to provide investment advice and recommendations “without regard to the
interests of anyone but the customer.”
George Michael Gerstein, partner at Stradley Ronon in
Washington and co-chair of the law firm’s Fiduciary Governance Group, told
ThinkAdvisor Monday that the standard of conduct for brokers and advisors “will
continue to be flashpoint for federal and state regulators, even in the wake of
Regulation Best Interest and the DOL’s 2020 [fiduciary] package.”
The “patchwork” of fiduciary rules — including those by the
states — “is a compliance risk and should be evaluated carefully.”
Valerie Mirko, a partner in Baker McKenzie’s Financial
Regulation and Enforcement Practice Group in Washington, told ThinkAdvisor in a
previous interview that “one of the key questions under the Massachusetts rule
is whether the fiduciary standard is episodic, meaning that it only applies at
the time of the recommendation or whether there is an ongoing duty that extends
beyond the time of the recommendation.”
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