On April 17, 2019 the New Jersey Bureau of Securities issued a proposal to require that retail broker dealers use the “fiduciary rule” in their dealings with customers. The rule proposal will also codify the fact that investment advisors already operate under the fiduciary rule. This will mean that in New Jersey brokers will have to put the interests of their clients first and not their commissions.
Imposition of the fiduciary standard on retail broker dealers has been a controversial topic nationwide for the past several years. The SEC staff has recommended to the Commission that the fiduciary rule be incorporated in federal securities laws. They have not been successful. Several years ago the Department of Labor passed regulations requiring that the fiduciary standard be applied to individual IRAs and 401(k) plans. However, a federal appeals court overturned those regulations in September 2018.
The SEC staff has now proposed to issue Regulation Best Interest in an effort to further enhance customer protection. However, in announcing its rule proposal, the Bureau of Securities stated that Regulation Best Interest does not go far enough in protecting investors.