IRI TO NJ SECURITIES BUREAU: LET NEW SEC RULES TAKE EFFECT

Posted on June 17, 2019

BEFORE DECIDING IF ADDITIONAL ACTION NEEDED TO PROTECT INVESTORS

IRI Comment Letter to NJ Bureau of Securities

WASHINGTON, D.C.
– New Jersey securities regulators should tap the brakes on new state regulations governing financial investment professionals until officials can identify whether any investor protection gaps exist under stringent new federal regulations that were announced this month, according to the Insured Retirement Institute (IRI).

New Jersey is one of a handful of states advancing standards of conduct regulations for financial professionals and firms. IRI says that individual state proposals would create a patchwork of inconsistent, conflicting or duplicative rules that would significantly impair investors’ access to valuable financial products and professional assistance about whether, when, and how to use those products.

In comments filed with the New Jersey Securities Bureau, IRI noted the recently finalized Regulation Best Interest announced last week by the federal Securities and Exchange Commission will address the concerns underlying the state’s proposed regulation. IRI also included recommendations for significant adjustments to the New Jersey proposal if the Bureau refused to delay its action.

“Our initial reaction is that Regulation Best Interest represents a substantial strengthening of investor protection compared to existing law in a manner that is consistent with the principle that financial professionals should be required to act in their clients’ best interest when providing personalized investment advice, while also preserving investor choice and access to the products and services they need to achieve their financial goals,” said Jason Berkowitz, IRI chief legal and regulatory affairs officer.

The New Jersey proposal would impose a fiduciary duty on broker-dealers, agents, investment advisers, and investment adviser representatives. A similar federal effort was vacated by the courts in 2018.  

“The SEC considered imposing a fiduciary standard on broker-dealers akin to the approach taken by the Bureau but declined to embrace it,” Berkowitz noted.” The adopting release for Reg BI clearly explains that, while a uniform fiduciary standard would produce greater consistency between broker-dealers and investment advisors, it would have an adverse impact on investor choice, cost, and investor access in the market for financial advice.”

IRI’s comments on the New Jersey proposed regulation stated that the Bureau now has the opportunity assess the SEC’s approach in the real world – and how the state’s proposed rule would “fit within the broader tapestry of regulations governing the conduct of financial professionals – before deciding whether and how to proceed.”

Berkowitz added, “We respectfully urge the Bureau to take advantage of the opportunity to see how well the final SEC rules will actually address your concerns before considering whether further regulatory action is needed to protect investors.”

# # #

Contact: Dan Zielinski