Fidelity Bonds

Massachusetts Recognizes ERISA in Novel Fiduciary Conduct Standard

03.05.2020

On February 21st, 2020, the Massachusetts Secretary of the Commonwealth filed the final rule of a fiduciary conduct standard for investment advisers, their representatives, broker-dealer, and their agents operating in the commonwealth, hired by plan sponsors to direct course-of-action on retirement plans. The regulations, which take effect on March 6th, will establish a fiduciary norm for brokers when offering investment recommendations to plan sponsors, making sure brokers act without regard to their own financial interests. The Massachusetts Securities Division has now deemed it ‘dishonest conduct or unethical’ for broker/dealers or investment advisors registered in the Bay State if they fail to act in conformity with a fiduciary duty to clients. Congruently, the novel ruling reinforces the current suitability standards that pertains to any relationship expressly omitted from the fiduciary standard.

“Enacting this rule will provide stronger protections for Massachusetts investors, by imposing a heightened duty of care and loyalty on broker-dealers and agents.” Secretary William Galvin stated. Galvin officially finalized the regulations, believing the SEC’s Regulations Best Interest fell short prior to the novel rule.

Massachusetts is the very first state to issue this fiduciary rule. States like Nevada and New Jersey are following closely behind, contemplating creating their own fiduciary advice standards.

These regulations also contain a ban on all sales contests, which Secretary Galvin alludes is a recurrent root of harm to investors. This rule stretches far beyond the SEC’s directive, which prohibits only those contests which are product-specific or reduced to certain securities in specific time periods.

Investment advisors, pension professionals, service providers and third party administrators are subject to service provider bonding guidelines under ERISA Section 412. For help in determining your coverage, visit the DOL Field Assistance Bulletin 2008-04 and review Q8 and Q18. Colonial Surety Company is the leading provider of service provider bonds. We are licensed in all 50 states and U.S. territories and make getting your I-bond easy and instant.

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