Fallout over the draft Nevada fiduciary regulation?

Financial Advisor IQ is reporting that Morgan Stanley and Wells Fargo “are among several brokerages threatening to cut down or eliminate their services in Nevada if the state goes through with its plans for a state-level fiduciary rule….”  Charles Schwab, Edward Jones and TD Ameritrade are also reportedly willing to limit investment information provided to investors in Nevada should the regulation move to a final stage.

Reprising Peirce’s “What’s in a Name” Speech

SEC Commissioner
Hester M. Peirce

Last July, SEC Commissioner Hester Peirce discussed in a speech the differences between the best interest standard within Regulation Best Interest and an adviser’s fiduciary duties. She said, in part:

In comparing the proposed Regulation Best Interest standard as well as a broker-dealer’s other requirements under the securities laws to an adviser’s fiduciary duty as described in the proposed interpretive release, only two differences stand out.  First, an adviser generally has an ongoing duty to monitor over the course of its relationship with its client, while a broker-dealer generally does not.  Second, a broker-dealer must either mitigate or eliminate any material financial conflict of interest it may have with its client.  An adviser is required only to disclose such a conflict.  Rhetoric aside, arguably proposed Regulation Best Interest would subject broker-dealers to an even more stringent standard than the fiduciary standard outlined in the Commission’s proposed interpretation.

House subcommittee schedules hearing on ESG disclosures

The House Subcommittee on Investor Protection, Entrepreneurship and Capital Markets will convene a hearing entitled, “Building a Sustainable and Competitive Economy: An Examination of Proposals to Improve Environmental, Social and Governance Disclosures.” The hearing will take place on Tuesday, March 26 at 2:00 PM. Hearings and markups will take place in 2128 Rayburn House Office Building and will be broadcast live on https://financialservices.house.gov/live/.

Nevada faces a “chorus of concerns” over its expansive fiduciary proposal

I was recently interviewed by Fund Intelligence regarding the comment letters sent to the Nevada Securities Division regarding its draft fiduciary duty regulations applicable to broker-dealers and investment advisers. We have already closely analyzed the proposal and written about its potential effects on private fund managers. I told Fund Intelligence: “Now that the comment period has closed, Nevada will have to wade through the chorus of concerns ranging from federal preemption to myriad interpretive gaps and loose threads in the proposal.” Some of the comment letters paid considerable attention to the numerous preemption issues, including under NSMIA and ERISA, created by the draft regulations.  In addition to preemption, the proposal also suffers from ambiguity in a number of key areas, which we have previously outlined, rendering the proposal overly broad.