Just this week, the Maryland Financial Consumer Protection Commission (MFCPC), chaired by Gary Gensler, released its report to the General Assembly. As we have previously noted, Maryland legislation passed last May in the House and Senate as part of a larger financial reform bill (titled the Financial Consumer Protection Act of 2018), which instructed the MFCPC to study the DOL’s 2016 fiduciary rule and SEC’s proposed Regulation Best Interest, to determine whether it would be in the best interest of the state to adopt its own fiduciary rule. The MFCPC held two public hearings where it has heard testimony from interested parties. This new report largely took a pessimistic view of Regulation Best Interest. Its ultimate recommendation to the Maryland legislature:
“The commission recommends that the General Assembly pass legislation that provides that a broker-dealer, broker-dealer agent, insurance producer, investment adviser, or investment adviser representative who offers advisory services or holds themselves out as advisors, consultants, or as providing advice, would be held to a fiduciary duty to act in the best interest of the customer without regard to the financial or other interest of the person or firm providing the advice. In addition to broadening the fiduciary duty standard in Maryland to broker-dealers and insurance producers, the fiduciary duty standard currently imposed on investment advisers in Maryland needs to be strengthened, as it is currently weaker than the national fiduciary duty standard. Broker-dealers or insurance agents who do not engage in providing advice or hold themselves out as doing so could continue to operate under a suitability standard. To comply with federal preemption laws, the statutory language should specify that State law does not impose on any broker-dealer any books and records requirement that is not imposed under federal law.”