{"id":20822,"date":"2023-10-09T21:55:15","date_gmt":"2023-10-09T21:55:15","guid":{"rendered":"https:\/\/www.thinkadvisor.com\/2023\/10\/09\/under-dol-rules-shadow-fiduciary-fight-rages-on\/"},"modified":"2023-10-09T21:55:15","modified_gmt":"2023-10-09T21:55:15","slug":"under-dol-rules-shadow-fiduciary-fight-rages-on","status":"publish","type":"post","link":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/2023\/10\/09\/under-dol-rules-shadow-fiduciary-fight-rages-on\/","title":{"rendered":"Under DOL Rule’s Shadow, Fiduciary Fight Rages On"},"content":{"rendered":"
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The court\u2019s decision \u201cis instrumentally useful for advocates of stronger fiduciary protections in investment advice to make that case,\u201d Tierney said.<\/p>\n

Indeed, Ron Rhoades, associate professor of finance at Western Kentucky University and director of its personal financial planning program, said in a recent email that Reg BI \u201cdoes not impose a fiduciary duty of loyalty\u201d but \u201ca new \u2018best interest\u2019 obligation that is still in the process of being defined and applied.\u201d<\/p>\n

With a new DOL fiduciary rule on the horizon, he said, \u201cthe fiduciary battlegrounds will continue to be active spheres where pro-fiduciary advocates will be pitted against firms whose economic models are threatened by the fiduciary standard.\u201d<\/p>\n

Fiduciary Battleground<\/h2>\n

The Massachusetts Supreme Judicial Court decision \u201cadds additional traction to the ongoing movement in the marketplace, aided by fiduciary advocates and federal and state securities regulators, to move toward a bona fide fiduciary standard,\u201c according to Rhoades.<\/p>\n

The most important aspect of the Massachusetts decision, according to Rhoades, \u201cis that states are not preempted from adopting fiduciary standard by federal securities laws,\u201c nor by the SEC\u2019s adoption of Reg BI.<\/p>\n

While the Massachusetts decision \u201cis not binding upon other state courts, nor on the federal courts, its precedent may well give impetus to at least a few other states to adopt fiduciary standards for broker-dealers when providing investment advice to retail clients.\u201c<\/p>\n

An alert from the law firm Ropes & Gray concurred<\/a> that the Massachusetts ruling \u201cleaves the door open for other state regulators to set more demanding standards applicable to broker-dealers operating in their states,\u201c and \u201craises a substantial threat of the very \u2018patchwork of inconsistent state-level standards\u2019\u201c of which former SEC Chairman Jay Clayton warned.<\/p>\n

Further litigation in other state or federal jurisdictions may seek to challenge this reasoning.<\/p>\n

Internet Advice<\/h2>\n

The Ropes & Gray alert also warns that the Massachusetts ruling also applies to investment recommendations or advice provided from outside the state via the internet.<\/p>\n

For national broker-dealers, including those operating internet platforms, the decision \u201cfurther complicates compliance and increases associated costs in states that impose obligations, like the Massachusetts Fiduciary Rule, that extend beyond Regulation BI\u2019s obligations,\u201d the alert said.<\/p>\n

\u201cParticular attention will be required to assess what sorts of communications by broker-dealers regarding investment opportunities to retail investors can be construed as investment recommendations or advice subject to heightened state-level standards,\u201d the firm wrote.<\/p>\n

For example, in Robinhood\u2019s case, Galvin \u201cclaimed Robinhood had encouraged frequent, risky, and unsuitable trading by retail investors, published investment categories like \u2018100 Most Popular\u2019 or \u2018Top Movers,\u2019 implemented strategies to incentivize customer engagement with its trading platform, and that each of these practices was tantamount to making investment recommendations to customers,\u201d the alert said.<\/p>\n

Robinhood\u2019s defenses to these arguments, the firm wrote, \u201chave yet to be addressed by the trial court or in the Secretary\u2019s administrative proceedings \u2014 as the litigation to date has focused on the legality of the Massachusetts Fiduciary Rule itself, not its application to Robinhood\u2019s business.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"

The court\u2019s decision \u201cis instrumentally useful for advocates of stronger fiduciary protections in investment advice to make that case,\u201d Tierney said. Indeed, Ron Rhoades, associate professor of finance at Western Kentucky University and director of...<\/p>\n","protected":false},"author":1,"featured_media":20823,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[],"tags":[1],"jetpack_featured_media_url":"https:\/\/blog.lifeinsurance-orleans.ca\/wp-content\/uploads\/2023\/10\/under-dol-rules-shadow-fiduciary-fight-rages-on.jpg","_links":{"self":[{"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/posts\/20822"}],"collection":[{"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/comments?post=20822"}],"version-history":[{"count":0,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/posts\/20822\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/media\/20823"}],"wp:attachment":[{"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/media?parent=20822"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/categories?post=20822"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blog.lifeinsurance-orleans.ca\/index.php\/wp-json\/wp\/v2\/tags?post=20822"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}