SIFMA issued a comment letter to the Nevada Securities Division expressing concern with the approach taken to its proposed statewide fiduciary standard.
The letter also asks the state to await the conclusion of the rulemaking underway at the Securities and Exchange Commission (SEC) to create a Best Interest Standard, which would act as a nationwide, uniform standard.
SIMFA cautions that while Nevada’s intentions are in the right place, its action could result in conflicting standards that would confuse investors and, ultimately, restrict information and access to a range of investment choices for them.
SIFMA furthermore says that Nevada’s approach would increase movement towards fee-based models, leaving many investors with reduced access to brokerage accounts.
“SIFMA has consistently supported strong, substantive conduct standards for broker/dealers and investment advisers to enhance investor protection, while at the same time preserving investor access to transaction-based advice and a variety of investment products,” the letter says. “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 goes on to say: “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.”
As for the emphasis on fee-based business models, SIFMA says, “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 … 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.”
SIFMA’s full letter can be found here.