WASHINGTON, D.C., August 14, 2024 – Today a federal court in Missouri issued a final ruling in favor of the Securities Industry and Financial Markets Association (SIFMA) on its legal challenge to two newly enacted Missouri disclosure and consent rules.

The rules required financial professionals who consider “a social objective or other nonfinancial objective” in their investment advice to disclose this to their customers and obtain the customers’ written consent to state-mandated language in the rules. The rules characterized a “nonfinancial” objectives as anything other than maximal “financial return,” and the court agreed with SIFMA that the rules could easily be read to encompass objectives that are routinely part of investment decisions, such as tax considerations, diversification, risk tolerance, time horizon, liquidity needs, faith or values-based objectives, and local community investment objectives, among others.

The court ruled in favor of SIFMA on all counts. The court issued a declaratory judgment stating that “the Rules are preempted by [National Securities Markets Improvements Act (NSMIA)] and [Employee Retirement Income Security Act (ERISA)], are unconstitutional under the First and Fourteenth Amendments of the United States Constitution, and are impermissibly vague under the Fourteenth Amendment of the United States Constitution.” The court also ordered a statewide permanent injunction prohibiting the implementation, application, or enforcement of the rules.

SIFMA’s President and CEO, Kenneth E. Bentsen, Jr., remarked: “Congress enacted NSMIA to alleviate the redundant, costly, and ineffective dual federal/state regulation of our securities market system. Today’s ruling was necessary to prevent Missouri from violating NSMIA, among other things, and from hindering communications between Missouri investors and the financial professionals who serve them. This decision marks a major victory not only for our national securities market system, but also for our nation.”

Bentsen continued: “Under today’s federal securities laws, financial professionals are already required to provide investment advice and recommendations that are in their customers’ best interest. That means they cannot put their interests ahead of their customers’ interests when recommending securities. The Missouri rules were thus unnecessary and created confusion.”

The court’s full decision can be found here: https://www.sifma.org/resources/submissions/order-on-motions-u-s-district-court-for-the-state-of-missouri-central-division/

###

SIFMA is the leading trade association for broker-dealers, investment banks and asset managers operating in the U.S. and global capital markets. On behalf of our industry’s nearly 1 million employees, we advocate for legislation, regulation and business policy affecting retail and institutional investors, equity and fixed income markets and related products and services. We serve as an industry coordinating body to promote fair and orderly markets, informed regulatory compliance, and efficient market operations and resiliency. We also provide a forum for industry policy and professional development. SIFMA, with offices in New York and Washington, D.C., is the U.S. regional member of the Global Financial Markets Association (GFMA). For more information, visit http://www.sifma.org.