Stakeholders expressed their concerns Wednesday at hearings in Maryland's House and Senate chambers on a bill that would compel broker-dealers, insurance agents and investment advisers to act in the best interest of clients.
The Financial Consumer Protection Act of 2019, which includes a fiduciary provision, was introduced by Democrats in each of the state's legislative chambers last month. The bill would require those financial professionals to act in the best interest of the customers "without regard to the financial or other interest of the person or firm providing the advice."
In the Senate hearing, several stakeholders urged the committee to remove the fiduciary standard provision, saying it will drive up compliance costs for financial advisers, limit services and increase costs for investors, and potentially get in the way of the Securities and Exchange Commission's standard of conduct package proposal, which offers a provision similar in scope.
Dale Brown, president and CEO of the Financial Services Institute, said the SEC's Regulation Best Interest proposal, known as Reg BI, will improve the status quo, and "we ask you to wait on your provision to see what the SEC does in finalizing" its rule.
Jason Berkowitz, vice president and counsel for regulatory affairs for the Insured Retirement Institute, said his group is not opposed to a fiduciary standard, but he urged state lawmakers to not to get ahead of the larger conversation. "We're not necessarily asking Maryland to stand down but to participate in that ongoing, national debate and be part of developing an overall solution," Mr. Berkowitz said.
Earlier in the hearing, Melanie Lubin, the state's securities commissioner, said the fiduciary standard provisions "attempt to level the playing field and will finally erase the confusion that exists surrounding a duty of care stockbrokers and other financial professionals owe to their investors."
The SEC proposal falls short, Ms. Lubin said, adding: "It does not provide the clear guidance that exists with fiduciary duty and its legal precedents. Best interest sounds like fiduciary duty, but it is not."
Maryland's Senate Finance Committee and House Economic Matters Committee did not vote on the proposed legislation Wednesday and no vote has been scheduled.
State Sen. James Rosapepe, a Democrat who introduced the bill in the Senate, said he doesn't want to "make the perfect the enemy of the good. So if the committee in its wisdom decides there are some of these provisions that you don't want to proceed with this year and you want to tweak some of them, I'm happy to work with you and with the attorney general's office to get these provisions in shape so we can pass what we need to."
In Washington, the House Financial Services Committee will hold a hearing Thursday on the SEC's proposed standard of conduct package.
