New Jersey Extends State Fiduciary Rule Finalization Amid Pandemic
New Jersey Governor Phil Murphy has signed an executive order to extend various deadlines associated with rulemaking for state agencies, including its proposed fiduciary rule for broker-dealers, due to the coronavirus (COVID-19) pandemic.
New Jersey Governor Phil Murphy has signed an executive order to extend various deadlines associated with rulemaking for state agencies, including its proposed fiduciary rule for broker-dealers, due to the coronavirus (COVID-19) pandemic.
New Jersey’s proposed fiduciary standard was issued in mid-April 2019 and would have expired if not finalized within one year. Governor Murphy’s executive order allows the rulemaking to be extended until 90 days after the state ends its public health emergency declaration.
“Every state agency is fully focused on the fight against COVID-19 right now,” said Governor Murphy. “This executive order provides them with the flexibility they need by extending deadlines associated with their normal rulemaking work until after this crisis is over.”
Last April, the New Jersey Bureau of Securities proposed a uniform fiduciary regulation that requires all registered financial services professionals in the state to be held to a higher advice standard than is currently required by FINRA’s suitability standard.
The proposed rule requires all registered financial services professionals to act in accordance with the fiduciary duty to their customers when providing investment advice or recommending an investment strategy, opening or transfer assets to any type of account, or the purchase, sale, or exchange of any security.
Conduct falling short of this fiduciary duty would, under the proposed rule, constitute a “dishonest and unethical practice.”
Currently, broker-dealers and their agents are required to abide by a suitability standard and must have a “reasonable basis” to believe a recommended transaction or investment strategy involving securities is suitable for the customer, while investment advisers and their representatives are held to a stricter fiduciary duty.
Nevada and Massachusetts issued similar fiduciary rule proposals for broker-dealers, but Massachusetts is the only state to finalize its rule, which went into effect in March 2020.
The SEC adopted its broker advice rule, Regulation Best Interest, in June 2019. Regulation BI establishes a “best interest” standard of conduct for brokers when they make a recommendation to a retail customer of any securities transaction or investment strategy involving securities. The compliance date is June 30, 2020.
