As noted in our prior update, we continue to cover the NJBOS’ rulemaking activity relating to a uniform fiduciary standard applicable to all investment professionals. On Monday, November 19, 2018 we attended the second public hearing held by the NJBOS. There were approximately 40 attendees at the second hearing, with 16 speakers, representing diverse interests, putting formal comments on the record (there were seven speakers at the first hearing).
Three takeaways from the second hearing:
- Scope of speakers expanded. As testament to the potential broad impact of the proposed Rule, the speakers at the second hearing included, in addition to the traditional industry groups, such wider-audience groups as the AARP, U.S. Chamber of Commerce, and Consumer Reports. Moreover, unlike the first hearing, the speakers at the second hearing included industry firms themselves – Primerica, Cetera, and Fidelity Investments.
- No consensus from the speakers. As with the speakers at the first hearing, the speakers at the second hearing were roughly evenly split over whether they were pro or anti Rule. Many of the same arguments were raised (e.g. preemption by ERISA and NSMIA, deference to the SEC’s Regulation Best Interest, and customer confusion caused by different standards of care). However, there were also new arguments raised. For example, the proposed Rule could create, as the DOL’s fiduciary rule purportedly had, the inadvertent consequence of limiting or eliminating access to commission-based models for lower to mid-tier customers.
- Anticipated next steps. Public comment on the Pre-Proposal remains open until December 14, 2018. The NJBOS will then review the written comments and consider the speakers’ remarks. The NJBOS anticipates publishing a proposed Rule before the end of Q1 2019, followed by another round of at least written public comments.
We intend on analyzing the speakers’ remarks and written comments submitted, and continuing our involvement in this process. If you would like to discuss the New Jersey process, please let us know.