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States Taking Fiduciary Reforms into Their Own Hands
PLANSPONSOR.COM | August 01, 2017
A Client Alert shared by Stradley Ronon, penned by ERISA attorneys George Michael Gerstein, Jessica Burt, and James Severs, warns that several states are in the process of debating and potentially adopting their own legislation relating to the fiduciary responsibilities of broker/dealers and investment advisers.
The laws could make for some interesting and challenging legal circumstances in the future, the alert warns, given that the Employee Retirement Income Security Act (ERISA) is generally understood to preempt state law. In recent years this generally meant that the Department of Labor (DOL) could enforce more rigorous conflict of interest standards on behalf of retirement investors than the individual regulators in more conservative states were apt to do. However, now that Republicans have regained control of Congress and the White House and are aiming at relaxing the recently expanded fiduciary rule the Obama administration sought to establish under ERISA, some states are considering what powers they have to pick up the slack.
Among the states debating/implementing their own conflict of interest rules are Connecticut, New Jersey and New York. Effective July 1, according to the Stradley Ronon attorneys, broker/dealers and investment advisers operating in Nevada became subject to the state’s financial planner statue, known as NRS 628A, “making them fiduciaries to their clients and requiring them to submit to a rigorous disclosure regimen.”
DOL Rule Opponents Have Good Day in Appeals Court
Insurancenewsnet; Aug 1, 2017
The Fifth Circuit Court of Appeals lived up to its reputation for being tough on government regulators Monday during a hearing on the controversial Department of Labor fiduciary rule.
The 68-minute hearing was marked by several spirited clashes between government attorney Michael Shih and Judge Edith H. Jones over the DOL’s authority to regulate individual retirement accounts and how investment advice works in practice.
The appeals court, which has a reputation for narrowly defining federal powers, can throw out the rule if it chooses. The so-called "Harkin amendment" in the Dodd-Frank Act of 2010 gives it reason to do so, said Eugene Scalia, plaintiff attorney. Initiated by former Sen. Tom Harkin, D-Iowa, the amendment bars the SEC from regulating fixed-indexed annuities as securities, as it tried to do with Rule 151A.