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SIFMA Testimony On New Jersey Fiduciary Rule Proposal

Date 17/07/2019

In testimony delivered today regarding New Jersey’s proposed rule to create a state fiduciary standard, SIFMA expressed strong concern and urged the state to defer to the new nationwide best interest standard finalized by the Securities and Exchange Commission (SEC) last month – Regulation Best Interest (Reg BI) – which addresses the investor protection concerns and goals stated by New Jersey policymakers.

“We urge the Bureau to give Reg BI a chance.  Help it succeed.  The best way to do so is to let it play out.  See how it performs.  See how it protects New Jersey investors,” SIFMA Managing Director and Associate General Counsel Kevin Carroll said in the testimony. “In the meantime, we further urge the Bureau to set-aside the proposal – particularly the ongoing fiduciary duty and ‘best of’ standard provisions – which would not contribute to investor protection, but would only impose new costs, burdens and disadvantages on both New Jersey investors and New Jersey commerce.”

The testimony focused on the impacts of the rulemaking on New Jersey investors and broker-dealers that have not been adequately anticipated or understood by the Bureau, specifically:

  • Reg BI substantially enhances the standard of conduct for broker-dealers and will fully protect New Jersey investors.
  • Imposing an ongoing fiduciary duty on brokerage accounts would effectively eliminate brokerage accounts in New Jersey and deny access to investment advice for many New Jersey retail investors.
  • Imposing a “best of” standard for account types, securities, and transaction-based compensation would be impossible to satisfy and would create negative incentives that disadvantage New Jersey investors.

The full testimony further outlines these views and can be found here.

SIFMA previously submitted comments in New Jersey detailing these concerns and others, as well as recommended changes, which can be found here.