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NV Securities Administration on Fiduciary Regulations ( Ch. 322, Laws of 2017)

Summary

SIFMA, along with 10 additional trade associations, submitted a letter to Nevada Securities Administrator Diana Foley regarding SB 383 (now known as Ch. 322, Laws of 2017). This new law removes the exemption for broker-dealers, investment advisers  and sales representatives from the definition of “financial planner” in NRS 628A and adds a new section to NRS Chapter 90 stating that B-Ds, IAs and sales reps “shall not violate the fiduciary duty toward a client imposed by NRS 628A.020.”

The letter outlines the primary concerns that should be addressed as the state continues to draft the proposed regulations. The trades look forward to continuing to work together to develop rules that preserve the spirit of Ch. 322, Laws of 2017 while fitting within the existing regulatory framework.

PDF

Date

30

August

2017

Excerpt

August 25, 2017

Ms. Diana Foley
Securities Administrator
Office of the Secretary of State
Securities Division
555 East Washington Avenue, Suite 5200
Las Vegas, Nevada 89101

RE: Ch. 322, Laws of 2017 (Amendments to NRS 628A) Rulemaking

Dear Administrator Foley:

We the undersigned trade associations appreciate your continued engagement with the industry on SB 383 (now known as Ch. 322, Laws of 2017). As you are aware, this new law removes the exemption for broker-dealers (B-Ds), investment advisers (IAs) and sales representatives from the definition of “financial planner” in NRS 628A and adds a new section to NRS Chapter 90 stating that B-Ds, IAs and sales reps “shall not violate the fiduciary duty toward a client imposed by NRS 628A.020.”

We understand that you are currently drafting proposed regulations. Per your request, we have provided a brief outline of some of our primary concerns (in no particular order) that we hope you will take into account during the drafting process.

▪ Not All B-Ds, IAs, and Sales Representatives Will Meet the Definition of Financial Planner. While the new law eliminates the exemption for B-Ds, IAs and sales representatives, we respectfully suggest that it does not automatically make all of these entities “financial planners.” They, by their activities, must still satisfy the financial planner definition. There are certainly instances in which an entity falls outside the definition of financial planner and the intent of the new law, including, for example, clearing B-Ds. There are also various registered and licensed representatives that support the sale to the end consumer that should not be included in the definition of a financial planner (e.g., internal wholesalers, sales reps on trading desks, and other non-advisers). We encourage you to recognize this in your proposed regulations.

As noted above, the new law states that B-Ds, IAs and sales reps “shall not violate the fiduciary duty toward a client imposed by NRS 628.020.” Respectfully, this also does not mean that all BDs, IAs and sales representatives are fiduciaries. Rather, the entity must first satisfy by its activities the definition of financial planner for the duties to be applicable.

▪ Certain Foundational Activities, or Activities Not Providing Specific Advice, Should Be Excluded by Rule. There are basic foundational activities of a relationship between clients and B-Ds, IAs and sales representatives where no specific personalized advice is given. Under Section 1.7 of the new law, you have the authority to “define or exclude an act, practice or course of business as a violation of the fiduciary duty.” To ensure that investors continue to have access to education, guidance and services, we respectfully suggest you exclude the following (non exhaustive) list of activities:

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