WASHINGTON, D.C., October 18, 2024 – On October 17 a federal court in Missouri entered final judgment in favor of the Securities Industry and Financial Markets Association (SIFMA) on its legal challenge to certain consent rules issued by the Missouri Secretary of State John R. Ashcroft and the Missouri Securities Commissioner Douglas Jacoby (collectively, “Defendants”).  The rules required financial firms and professionals that incorporated “a social objective or other nonfinancial objective” into their investment advice to obtain customers’ written consent to state-scripted language acknowledging that the advice is inconsistent with maximizing financial returns.

On August 14, 2024, the Missouri federal court entered an order granting SIFMA’s motion for summary judgment, denying Defendants’ motion for summary judgment, and striking down the Missouri rules in their entirety on both federal preemption and constitutional grounds.

Defendants appealed the court’s decision to the U.S. Court of Appeals for the Eighth Circuit.  Subsequently, the parties agreed upon a stipulated award of $500,000 of attorney’s fees to SIFMA, contingent upon Defendants withdrawing their appeal.  Defendants have since withdrawn their appeal and paid attorneys’ fees to SIFMA.  At the parties’ request, the court has now entered final judgment in this matter and brought it to a close. This means that Defendants may no longer require financial firms and professionals to use the prescribed language or forms that were the subject of the Missouri rules.

“Today’s final judgment affirms that the Missouri rules are preempted by the National Securities Markets Improvements Act (NSMIA) and the Employee Retirement Income Security Act (ERISA) and are unconstitutional under the First and Fourteenth Amendments.  Beyond the clear violations of NSMIA and ERISA, the alleged problem the rules sought to address—firms providing insufficient disclosure in connection with investment advice—was already prohibited under federal law.  As such, this decision affirms the primacy of federal securities law, and it helps avoid a patchwork of conflicting and burdensome state rules that would undermine our national market system,” stated SIFMA President and CEO, Kenneth E. Bentsen, Jr.  “Now, the rules are fully stricken, and SIFMA’s members are free to go about their business with that certainty.”

“Today’s ruling is not only a strong reminder about the clear limits imposed by NSMIA and ERISA on state regulation of securities activities,” Bentsen continued, “but also an even stronger reminder to all regulators that adopting unlawful rules can and will result in the payment of attorney’s fees.”

The court’s final judgment can be found here.

SIFMA’s August 14 press release on the original court summary judgment ruling can be found here.

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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