Page 33 - Investment Advisor - November 2023
P. 33
The Playing Field
By Melanie Waddell
under dol rule’s shadow, Fiduciary Fight
rages on
a court decision to uphold the Massachusetts fiduciary rule could open
doors to similar regulations on brokers in other states, lawyers say.
he fiduciary duty debate is Massachusetts fiduciary rule and allow
raging once again with two Secretary of State William Galvin’s
Trecent developments: the administrative case against Robinhood
Massachusetts fiduciary rule being to move forward.
upheld by the state’s highest court and The case against Robinhood involves
the Labor Department’s new fiduciary Galvin accusing the brokerage in
rule being reviewed by the Office of December 2020 of violating state law by
Management and Budget. using overly “aggressive tactics to attract
With the ruling by the Massachusetts new, often inexperienced, investors”
Supreme Judicial Court in late August, and “gamification to encourage and
broker-dealers in Massachusetts pro- entice continuous and repetitive use” of
viding investment recommendations or its mobile application.
advice to retail customers now face a new In April, Galvin, Massachusetts’
compliance challenge: They must com- top securities regulator, appealed a
ply with the Securities and Exchange Superior Court judge’s decision issued
“It makes sense for Commission’s Regulation Best Interest last March that struck down the state’s
the proposal to be and with the state’s fiduciary rule. fiduciary rule.
With the Massachusetts Superior
A new fiduciary rule in Massachusetts
released by the OMB brings with it a renewed impetus for Court ruling, “broker-dealers oper-
and published in other states to move forward with their ating in Massachusetts will be
subject to a higher standard of care
own fiduciary rules — creating a patch-
the Federal Register work of regulations, some observers than that imposed by federal regula-
tion and by almost any other state,”
complain — and is also an indication
before the next that Reg BI is flawed. attorneys at K&L Gates opined in a
Labor filed its new fiduciary rule at
possible government OMB in early September. recent alert.
The court’s determination that Reg
shutdown in While OMB reviews typically take 90 BI “establishes a floor and that states
mid-November.” days, the word on the street is that OMB are permitted to establish higher stan-
could release Labor’s fiduciary plan as
dards could embolden other states to
early as October. adopt similar laws and will cause bro-
—Fred Reish “It makes sense for the proposal to ker-dealers to have to monitor the stan-
be released by the OMB and published dard of care in each jurisdiction where
in the Federal Register before the next they operate, as opposed to adhering
possible government shutdown in mid- to a single standard,” the K&L Gates
November,” said Fred Reish, partner at attorneys wrote.
Faegre Drinker. James Tierney, who researches secu-
rities law at the Chicago-Kent College
MAssAchusetts rulIng of Law, said on a recent webcast held by
The Massachusetts Supreme the Institute for the Fiduciary Standard
Judicial Court ruled to uphold the that the ruling in Massachusetts “is
November 2023 Investment AdvIsor 31
