David Libowsky and Daniel Strashun author an article in Law360 titled "NJ Fiduciary Rule Would Add To Investment Firms' Burdens."

New Jersey has issued a proposal for a new rule that would institute a uniform fiduciary standard for broker-dealers and investment advisers registered with the state. On April 15, 2019, the New Jersey Bureau of Securities proposed amendments to Subchapter 6 of Chapter 47 of the New Jersey Administrative Code.

These amendments, including new Section 13:47A-6.4, would impose a uniform fiduciary standard on broker-dealers and investment advisers when they:

  • Recommend a transaction or an investment strategy;

  • Recommend opening, or transferring assets to, any type of account; or

  • Provide investment advisory services.

The rule proposal would substantially heighten the standard of care required by broker-dealers beyond the current Financial Industry Regulatory Authority suitability standard.[1] It would also exceed the standard of care which the U.S. Securities and Exchange Commission is seeking to create by way of its proposed Regulation Best Interest, or Reg BI.

Under the proposed New Jersey fiduciary standard, brokers would be obligated to recommend securities, investment strategies and accounts that are “the best of the reasonably available options” based upon risks, costs and conflicts of interest. The New Jersey Bureau of Securities expects to adopt a final rule sometime in fall 2019. Firms have an opportunity to comment on the rule proposal until June 14.

To read the entire article, click here.


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