New Jersey officials announced Monday a proposed regulation that would require financial professionals registered in the state to act as fiduciaries when providing investment advice, recommending investment strategies, opening investors' accounts and conducting securities transactions.
"Today, we are strengthening the integrity of New Jersey's financial services industry by proposing some of the strongest investor protections in the nation," said Gov. Phil Murphy in a news release.
"At a time when the federal government is undermining the consumer protections implemented in the wake of the 2008 economic crash, we are committed to ensuring our residents and families are protected from predatory financial practices," Mr. Murphy added.
The proposed rule has been published in the New Jersey Register, and there will be a 60-day period for written public comments. The New Jersey Bureau of Securities will then review all comments. A summary of the public comments and the bureau's response to them will be published in the fall, the news release said. Then the rule becomes final and will take effect in 90 days.
"Investors should be able to trust that they are not receiving conflicted advice when investing their hard-earned savings," said Paul R. Rodríguez, acting director of the division of consumer affairs, in the news release.
"Most investors assume all financial professionals are obligated to provide unbiased advice," the release said. "But under current federal standards, only investment advisers and their representatives have a fiduciary duty to put their clients' interests above their own."
The news release added that "broker-dealers and their agents — who provide similar financial services — are subject to a less stringent duty to provide recommendations that are merely 'suitable' for their clients," adding that critics say the suitability standard "leaves investors vulnerable to conflicts of interest and excessive fees."