Los Angeles partner Bruce Ashton was quoted in the Advisor News article “Firms May Need to Rethink DOL Rule After Scottrade Charges.” The article discusses a decision by Massachusetts regulators to file state charges against brokerage firm Scottrade, claiming it violated the Department of Labor (DOL) fiduciary rule. The state claims Scottrade ignored policies and procedures that it had put in place in order to comply with the DOL rule. By ignoring these policies, the state claims Scottrade violated state laws by operating in bad faith, which has led analysts to rethink their advice given the influence of the DOL rule in the charges.
Bruce explained that few analysts could have foreseen a situation in which state regulators would seize on lax compliance with a federal regulation as an impetus for state charges. He added, “So the state is asserting that Scottrade’s failure to follow its own policy constitutes a violation of Massachusetts state law. They only quote one part of the policy, and there may be other aspects of the Scottrade written supervisory procedures that are relevant and show that the company is not failing to observe the standards. But that remains to be seen.”