In the absence of a fiduciary standard at the federal level, the Commonwealth of Massachusetts took a step closer to imposing its own.
Secretary of the Commonwealth William Galvin filed regulations which he says will impose a “true fiduciary conduct standard” in the Bay State.
The new regulations, which will go into effect on March 6, will require broker-dealers and broker-dealer agents to provide investment advice and recommendations without regard to the interests of anyone but the customer.
“Since the SEC has failed to enact a meaningful conduct rule to protect working families from abusive practices in the brokerage industry, it has been left to my office to apply a real fiduciary standard on broker-dealers and agents in Massachusetts,” Galvin said in a statement. “Enacting this rule will provide stronger protections for Massachusetts investors, by imposing a heightened duty of care and loyalty on broker-dealers and agents.”
“This standard will protect Massachusetts retirees and their hard-earned retirement savings from conflicted investment advice, which has been shown to cost investors billions of dollars each year,” he added.
Sales contests
Among the provisions included in the new regulations is a prohibition on all sales contests, which Galvin’s office has “identified as a repeated cause of harm to investors.”
The rule goes beyond the SEC’s regulations, which bans only those contests which are product-specific or limited to particular securities in particular time periods.
A version of the new regulations was originally made public by Galvin’s Securities Division in July 2019, when the Division held a preliminary comment period on draft regulations. A formal comment period and a public hearing were held on amended regulations in January.
Changes made to the final regulations reflect the feedback provided by members of the public and industry during the comment periods.
The text of the final regulations is found here.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
