Christopher Gerold, Chief of the New Jersey Bureau of Securities, is playing a lead role in developing a fiduciary rule for the state to formulate investment advice requirements. Other states like Nevada and New York are also considering or have already approved laws to develop a fiduciary rule. However, this development does not go along with the Securities and Exchange Commission’s (SEC) “advice reform package,” which was recently announced and is based on “Regulation Best Interest” (Reg BI) in order to further empower the existing framework of broker suitability standard.
Gerold said in an interview in Austin, Texas, on the North American Securities Administrators Association (NASAA) annual conference, “In terms of doing a model rule for NASAA members, that’s going to be decided by the membership and the board. I am not going to be pushing my specific agenda on the membership.” He thus made it clear that he did not wish to take the organization in a specific direction by suggesting a model fiduciary rule which others can also adopt. The fiduciary rule is a kind of regulation defining fiduciary duty and fiduciaries are bound by law to protect the best interest of the beneficiaries in the USA, by providing the best possible advice rather than protecting the interests of financial planners. Also, a few months ago, NASAA had opened 130 new cryptocurrency investigations.
Gerold expressed the need for states to undertake measures to regulate investment advisor and broker conduct especially in the context of the SEC’s Reg BI. New Jersey had also come up with its own model of the fiduciary rule that would legally bind brokers to offer the best possible and reasonable option of products or services and the beneficiaries would be charged a reasonable amount for this. He also said that they are planning adoption of the rule as the next step, but a timeline for the above has not yet been fixed and mentioned that any differences that might emerge with the SEC would be resolved as he “doesn’t believe there is any tension between the SEC.”
The coming of the Reg BI has resulted in many states reconsidering their advising standards as most of them were suitability based. Therefore, states either must come up with their own version of Reg BI or simply follow it or bring in some other fiduciary rule or standard. The state of New Jersey had started the task of formulating its own fiduciary rules as the state authorities felt that the proposals outlined in the Reg BI were not adequate to protect the interests of the investors. New Jersey had already started the rulemaking process wherein the meantime, the Reg Bi got the approval of the SEC. However, the SEC has been recently challenged by seven states and the XY Planning Network, with all of them filing lawsuits against it.
Gerold made it clear that he did not see his role as being the cause of any conflict in the relationship between the NASAA and the SEC. He gave repeated assurance that he would take care of the interests of the common investor and do “regulatory work” having seen his parents labor hard, very closely, after losing their savings in securities fraud. Now investors will be able to decide with time how well the new fiduciary rule in the state has worked in their favor.
