The Massachusetts Securities Division adopted a watered-down fiduciary-rule for broker-dealers, effective March 6, with a compliance deadline of September 1, 2020. The move comes after years of announced intention to do so – especially after the Obama Labor Department’s fiduciary-rule got shot down in the courts.
The Rule requires a broker-dealer to act as a fiduciary for retail customers (excluding institutional accounts and investment advisers) when a broker:
• Has discretion (other than time and price);
• Has undertaken a contractual fiduciary duty; or
• Has undertaken a contractual duty to monitor a customer’s account.
The fiduciary duty of care requires reasonable inquiry of potential conflicts of interest and of suitability factors. The duty of loyalty requires conflicts disclosure and management, with disinterested advice in the customer’s interest.
As adopted, the Rule seems to impose few truly new obligations. SIFMA has indicated it is reviewing whether the Rule is consistent with existing law, including SEC Reg. BI. Generally, one might expect legal challenges to follow.
The Rule is here.
The Adopting Release is here.
Thomas K. Potter, III (tpotter@burr.com) is a partner in the Securities Litigation Practice Group at Burr & Forman, LLP. Tom is licensed in Tennessee, Texas, and Louisiana. He has over 34 years of experience representing financial institutions in litigation, regulatory and compliance matters. See attorney profile.
© 2020 by Thomas K. Potter, III (all rights reserved).
PartnerTom Potter is a Partner in the firm's Nashville office, and his practice focuses on securities, corporate disputes, and appellate litigation. Tom has over 35 years of experience representing business interests.
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