Los Angeles partner Fred Reish and Washington, D.C., partner Brad Campbell were quoted in a BenefitsPro article titled “8 Highlights of Nevada’s Fiduciary Proposal.” The article discusses how, in 2017, Nevada’s governor signed a law passed by the state’s legislature requiring a fiduciary standard for brokers. The proposed parameters of the new rule were released on January 18, 2019, and are more expansive than industry observers were expecting.
Nevada’s proposal includes a new private right of action, allowing investors to sue for allegations of fiduciary breach. The SEC’s proposed Regulation Best Interest, which is designed to raise brokers’ existing suitability standard for investment recommendations to retail investors, does not include a private right of action. Under that rule, the SEC and FINRA would enforce breaches.
“That single thing will make the Nevada rule much more impactful than Reg BI,” Fred said.
The state’s proposal applies a broad definition of investment advice, and offers only narrow exemptions for activities that would fall outside the realm of fiduciary advice.
“This is the opening salvo in what is going to be a much broader war,” Brad said. He also noted that he fears the “Balkanization” of securities regulations, whereby practitioners will be subject to a patchwork of different standards across state lines.
From his experience having overseen the drafting of regulations at the federal level, Brad suggested Nevada’s proposal leaves plenty to be desired.
“I am not impressed with the quality of the drafting in this proposal,” Brad said. “It doesn’t look like the product of 14 months of deep thought.”