A new Nevada law expanding the fiduciary responsibilities of certain financial professionals could have implications well beyond the border of the Silver State, supporters and critics agree — for significantly different reasons.
Enacted in July, the law places fiduciary responsibilities on broker-dealers, registered investment advisers and some financial services sales representatives. Previously, these professionals were excluded from the existing state law covering the fiduciary duties of "financial planners."
The impact on retirement plans, institutional investors and individual investors remains uncertain pending regulations to implement the law amid critics' arguments that it conflicts with the Employee Retirement Income Security Act as well rules set by the Securities and Exchange Commission. The law appears to be the first of its kind at the state level, but that's little comfort to critics.
"It's a concern that this situation proliferates to 50 different states' legislation," said Brian Graff, CEO of the American Retirement Association, Arlington, Va., whose organization opposes the law. "Imagine dealing with 50 different state courts" if plaintiffs sue under expanded state laws.
The ARA is an umbrella group for trade groups representing plan sponsors, actuaries, consultants, administrators, insurance professionals, financial advisers, accountants, attorneys and human resource managers.
Supporters say the new law is a response to President Donald Trump's effort to delay, dilute and perhaps demolish the Department of Labor's fiduciary rule developed under former President Barack Obama (Pensions & Investments, Aug. 29, 2017). They say some state legislatures, alarmed at the status of the fiduciary rule, might follow Nevada's approach.
These financial professionals "should put their clients' needs before their own," state Sen. Aaron Ford said in an interview. He introduced the fiduciary duty legislation – Senate Bill 383 – on March 20. The bill was signed by Nevada Gov. Brian Sandoval on June 2.
Mr. Ford, the state Senate majority leader, said the legislation reflected his concern that the federal fiduciary rule would be weakened by President Trump. He introduced the bill shortly after the Department of Labor announced an initial delay in implementing the fiduciary rule.
Given the uncertainty of the federal rule, "we have to protect the citizens of Nevada," said Mr. Ford. He added legislators from several other states have contacted him, but he declined to identify them.
"We want everybody giving (financial) information to be giving the best information," said Barry Gold, director of government relations for AARP Nevada, a supporter of the law. "We supported it at the state level and we supported the fiduciary rule at the national level."