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Standard of Care

State laws and regulations may determine the standard of care – that is, the duties, obligations and responsibilities – that insurance producers and other financial advisors owe to their clients. NAIFA advocacy is working to ensure state laws and regulations do not adversely impact advisors, their clients or other consumers.

Federal securities regulators have been working on a standard of care for the recommendation and sale of securities since the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010. In 2016, the Department of Labor adopted its fiduciary rule, which broadly expanded the circumstances under which a person would be considered a fiduciary in connection with retirement accounts. NAIFA strongly opposed the adoption of this rule, on the grounds that it would harm the ability of low and mid-market consumers to have access to financial products and professional advice and services. The rule, which went into effect in 2017, was vacated and invalidated by federal courts in 2018. Most recently, the U.S. Securities and Exchange Commission issued a proposed rule in April 2018 that would implement a best interest standard of conduct for broker dealers and their registered representatives. The SEC has received thousands of comment letters on proposed Regulation BI. The latest SEC Regulatory Calendar indicates this rule is scheduled to be adopted in final form in the summer of 2019.

Some states have indicated they are not willing to stay on the sidelines while the SEC considers its proposed rule – despite pleas made by industry groups and others that the adoption of a “patchwork quilt” of differing and possibly conflicting state requirements would ultimately prove harmful and more costly to consumers. Several states have either recently considered or are in the process of considering legislation or regulations that would impose a fiduciary duty on broker-dealers, investment advisers, registered representatives, and, in some cases, insurance producers.

NAIFA supports a requirement that all financial professionals, when making a recommendation regarding an annuity or a security, act in the consumer’s best interests – with care, skill, prudence and diligence – based on the consumer’s financial needs and objectives. A properly-crafted best interest standard will provide an enhanced standard of conduct requiring the advisor to place the consumer’s interests ahead of the advisor’s, while also preserving ability of low- and mid-market consumers to access financial products and professional advice and services. NAIFA opposes a strict fiduciary duty standard for broker-dealers and their representatives, because adoption of such a standard will result in many firms changing from a commission-based to a fee-for-service model, which will eliminate the commission-based services relied on by many small and moderate-sized investors.

State-level activity on the standard of care issue includes:


In 2017, Nevada lawmakers enacted SB 383, which expanded the state’s existing fiduciary duty law (applicable to “financial planners”) by broadening the definition of financial planner to include broker-dealers and their representatives. Over one-and-a-half years later, in January 2019, the Nevada securities regulator issued proposed regulations to implement this law. NAIFA and NAIFA-Nevada as well as other financial services industry groups submitted comment letters objecting to the strict requirements of the proposed regulation and the proposal’s potential impact on small and mid-sized investors. The regulator is currently reviewing the comments.


In 2019 Maryland considered SB 786, a lengthy financial services bill that included a half-page-long section that would have made broker-dealers, investment advisers, registered representatives, and insurance producers fiduciaries. NAIFA-Maryland quickly organized a coalition of industry colleagues to oppose the fiduciary duty provisions. Coalition members testified at hearings, met with key legislators, and engaged in other advocacy activities. These efforts were successful, and the bill was killed in committee.

New York

In July 2018, the New York Department of Financial Services adopted final revisions to Insurance Regulation 187, which impose a problematic best interest standard on all annuity and life insurance transactions. NAIFA-New York State strongly opposed the changes to Regulation 187, raising concerns that the new standard would effectively impose a fiduciary duty on life insurance and annuity sales, and that the regulation was unclear about its impact on certain compensation arrangements. In November 2018, following adoption of the revised regulation, NAIFA-NYS filed a lawsuit challenging the validity of the revised Regulation 187.

In April 2021, the New York Supreme Court, Appellate Division ruled that Regulation 187 is unconstitutional.

New Jersey

In the fall of 2018, New Jersey Governor Phil Murphy announced that the state’s Bureau of Securities would be proposing a new rule that would impose a uniform fiduciary standard on broker-dealers and investment advisers. The Bureau of Securities issued a Notice of Pre-Proposal that laid out its intentions but did not contain specific regulatory language. NAIFA-New Jersey submitted comments on the proposal and presented testimony at a hearing held by the Bureau. On April 15, 2019, the Bureau of Securities published its proposed fiduciary duty rule. NAIFA-New Jersey and NAIFA are reviewing the proposed rule and will submit comments by the June 14, 2019, deadline. We are also coordinating with other financial services trade groups on this issue.


The National Association of Insurance Commissioners has been drafting revisions to its Suitability in Annuity Transactions Model Regulation since late 2017. The amendments would include, among other revisions, an enhanced standard of care requiring insurers and producers to place the consumer’s interests ahead of the insurer’s/producer’s interests. NAIFA has been closely involved in the NAIC’s deliberations on these issues. We have submitted numerous comment letters to the Suitability Working Group, testified at every Working Group meeting, and had a one-on-one meeting with the chair of the Working Group. The NAIC’s goal is to complete the amendments by the end of 2019.