A fiduciary rule proposed by Massachusetts Secretary of the Commonwealth William Galvin is making waves among Boston business advocates, according to a new report from the Boston Globe. Today, the Greater Boston Chamber of Commerce will email chamber members and policy brief subscribers about the organization's opposition to Galvin’s attempt to create a more stringent standard for broker/dealers, arguing it risks instilling a chilling effect on brokers in the Bay State.
Shortly after the Securities and Exchange Commission finalized its Regulation Best Interest rule on June 5, Secretary Galvin announced he was seeking public comments on a regulation that would introduce a fiduciary standard for Massachusetts b/ds. In a statement on June 14, Galvin, who has long been known as a fierce advocate for investor protection, directly connected the announcement to Reg BI, arguing states may need to take the lead in lieu of what he argued was weak federal regulation.
“We are proposing this standard, because the SEC has failed to provide investors with the protections they need against conflicts of interest in the financial industry, with its recent ‘Regulation Best Interest’ rule,” Galvin said. “My office has seen firsthand the serious financial harm that investors and savers have suffered as a result of conflicted financial advice. Investors must come first.
In a June 24 letter cited in the Globe’s report, Greater Boston Chamber of Commerce President and CEO James E. Rooney disputed Galvin’s negative appraisal of Reg BI, arguing it would provide clear and consistent guidance for b/ds throughout the country. Rooney implored Galvin to refrain from instituting any new regulatory frameworks until at least one year after Reg BI was implemented (which is set to occur on June 30, 2020).
“The net impact of the proposed Massachusetts fiduciary conduct rule would be overwhelmingly negative for all stakeholders, ranging from individual broker-dealers to retail investors. The cost of doing business will increase for broker-dealers, while the menu of services they are able to offer clients will decrease,” the letter warned. “Long-term, this will pose a risk to average investors’ ability to build savings and wealth.”
The Globe noted other critics of the proposed rule included the Massachusetts Business Roundtable, the Massachusetts Competitive Partnership and the Massachusetts Taxpayers Foundation, as well as firms like LPL Financial and Morgan Stanley. The proposed rule also has supporters, including state Attorney General Maura Healey and the Public Investors Advocate Bar Association, according to the Globe.