Massachusetts has adopted final amendments to the Commonwealth’s standard of conduct regulations applicable to broker-dealers and their registered representatives that will impose a fiduciary duty standard of conduct on broker-dealers and their reps in connection with the recommendation and sale of securities. The amendments and new standard of conduct will be effective upon publication in the Massachusetts Register, scheduled for March 6, 2020, but enforcement will be delayed until September 1, 2020.
In response to concerns raised by NAIFA, NAIFA-Massachusetts and others in our comments letters and hearing testimony, the final amendments do include some important modifications from the original proposal, including:
1. The new standard of conduct will not apply to insurance producers or insurance products;
2. Title restrictions, such as the presumption of a fiduciary duty being created by someone’s use of titles such as “adviser” are no longer a part of the rule; and
3. The instances in which the fiduciary duty will be an ongoing duty (rather than a “snapshot”, at the time of the recommendation/transaction only duty) have been narrowed down.
While we appreciate that the final rule was responsive to several of the concerns raised by NAIFA and NAIFA-Massachusetts, it is likely that the fiduciary duty created by the rule will adversely impact the ability of small and mid-market investors to access financial products and professional advice and services, and limit the choices available to consumers.
“While the Massachusetts Securities Division addressed some of NAIFA’s concerns with the rule that we raised in letters and a public hearing, we remain concerned that the provision will create unnecessary barriers between financial professionals and clients; will reduce the access of Main Street investors to needed guidance, products, and services; and could contribute to confusion if multiple states require varying and possibly contradictory standards of care from financial professionals,” said NAIFA CEO Kevin Mayeux. “NAIFA is committed to constantly working on behalf of insurance and financial professionals and their clients so that everyday Americans have unfettered access to quality financial services.”