Maryland Lawmakers Reject Fiduciary Standard Bill

By: Matthew D. Kohel | 4.9.19 | Media

On April 4, 2019, the Maryland Senate Finance Committee voted almost unanimously to recommend the rejection of a bill that would have held broker-dealers and insurance agents to a fiduciary standard and required them to “act in the best interest of the customer without regard to the financial or other interest of the person or firm providing the advice.” Ten out of the 11 committee members moved to consider the bill as “unfavorable,” and the other member was excused from voting.

The fiduciary bill was just one part of the Financial Consumer Protection Act of 2019. By including insurance agents, the Maryland bill was similar to the Department of Labor’s fiduciary rule that was vacated by the Fifth Circuit in 2018. Other states that have introduced their own versions of the fiduciary rule include New Jersey, Nevada, and Connecticut. Like Nevada, Maryland’s bill gave that state’s consumer protection agency the authority to promulgate regulations.

The SEC is working on Regulation Best Interest, which will create a lower standard than a fiduciary duty and is not likely to be finalized in the coming months. While customers deserve protection, the passage of laws by several states is likely to lead to inconsistent rules among them and create conflicts with the SEC’s pending regulation. This will cause uncertainty and complications for the securities industry and consumer confusion that will not exist under the SEC’s proposal, which would set a uniform nationwide standard.

Whether the rejection of the Maryland fiduciary bill will slow the momentum of fiduciary rulemaking initiatives in other states remains to be seen.

Matthew Kohel is a Partner in Goodell DeVries’ Commercial Litigation Group. Mr. Kohel and other Goodell DeVries attorneys handle nationwide litigation and arbitration involving, among others, broker-dealers and registered representatives. If you are interested in having a Commercial Litigation attorney present at your next organization's meeting, please contact us today.