Recent New Jersey Rule Proposal Progresses State Efforts to Impose Fiduciary Duties on Brokers

On April 15, the New Jersey Bureau of Securities (the “Bureau”) issued a rule proposal to establish a uniform fiduciary duty standard applicable to investment advisers, brokers-dealers and their registered representatives and agents.  Specifically, the proposed rule (N.J.A.C. 13:47A-6.4), which could take effect as early as the end of the year, will require all investment professionals registered with the Bureau to provide investment advice, recommend investment strategies, open or transfer assets to any type of account, or make the purchase, sale, or exchange of any security without regard to their company’s (or their own) interest. While the proposed rule merely codifies the fiduciary duty already owed to customers by investment advisers, it would impose a heightened standard of care on broker-dealers.  Currently, broker-dealers and their representatives are subject to the suitability standard, which requires them to hold a reasonable belief that…

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