Washington, D.C., March 1, 2019 – In a comment letter submitted today on a rule proposed by the Nevada Securities Division creating a state fiduciary standard, SIFMA expressed strong concern with the approach taken and urged state regulators to await the conclusion of the rulemaking underway at the Securities and Exchange Commission (SEC) which would create a nationwide, uniform, heightened, best interest standard.

“SIFMA has consistently supported strong, substantive conduct standards for broker-dealers and investment advisors to enhance investor protection, while at the same time preserving investor access to transaction-based advice and a variety of investment products,” SIFMA wrote in the letter. “For that reason, we have supported the efforts of the SEC, as proposed by Congress, to develop and finalize comprehensive federal regulations that will meaningfully raise the bar for broker dealers when providing personalized investment advice about securities to retail customers.”

The letter cautions that promulgating standard of conduct laws and rules at the state level, while well intentioned, will result in conflicting standards, contributing to investor confusion, and ultimately less access to information and choice of products for investors.

“The most reasonable approach to protect investors and avoid investor confusion is to allow the SEC – the primary federal securities regulatory agency – to promulgate a uniform, nationwide, heightened, best interest standard of conduct for broker-dealers. A state-by-state approach would result in an uneven patchwork of laws that would be duplicative of, different than, and/or in conflict with federal standards,” the letter continued. “It would also introduce a new level of investor confusion, which would undercut not only the new, uniform federal standard, but also the interest of investor protection generally.”

The approach taken in the proposed rule also runs a significant risk of imposing regulations that would drive increased movement to a fee-based business model, leaving many investors without access to financial products and professional advice and services because of the nature and structure of the fee-based model. Generally, these accounts have higher fees and certain minimum asset requirements.

“Many Nevada investors would likely suffer the loss of access to brokerage accounts and equally important, the loss of access to advice from broker-dealers. The ability to receive advice incidental to brokerage services as permitted by SEC rules is often more appropriate for, among others, smaller investors, for whom a brokerage account is usually more economical, as well as investors who generally buy and hold and do not need or want to trade frequently, or who do not want to pay for ongoing advice and monitoring through an advisory account,” the letter concludes. “In addition, many of these same investors, particularly smaller investors, would not qualify for fee-based accounts, and so would lose access to advice altogether. Nevada should affirmatively avoid creating these incentives and the unintended negative consequences that will likely follow.”

The proposed rule also raises numerous, significant federal preemption issues, particularly under the National Securities Markets Improvements Act (NSMIA).

SIFMA’s full comment, letter detailing these concerns and others, as well as recommended changes, can be found here.

SIFMA also joined with 11 other financial services trade associations in a comment letter echoing these concerns and highlighting key problems with the draft regulations. That letter can be found here.

-30-

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.