State Fiduciary and Best Interest Developments: Texas, Virginia and Montana

Texas, Virginia and Montana are the latest states to enact legislation or rules setting forth a best interest standard for annuity producers in recommending annuities to their customers.  Each state has designed its rule to follow the NAIC’s model regulation concerning suitability in annuity transactions, which requires producers to act in the consumer’s best interest without placing the producer’s financial interest ahead of the consumer’s.  Virginia’s new rule took effect May 1, 2021, while Texas’s and Montana’s rules will take effect on September 1 and October 1, 2021, respectively.

Continue reading “State Fiduciary and Best Interest Developments: Texas, Virginia and Montana”

Robinhood vs. Massachusetts’ Secretary of the Commonwealth: A Battle for the Ages over Massachusetts’ New Strict Fiduciary Duty Rule

Massachusetts’ Secretary of the Commonwealth, William Galvin, is taking on Robinhood for violating Massachusetts’ new fiduciary duty rule for broker-dealers. In December 2020, Galvin filed a 24-page regulatory complaint, seeking to ban the popular trading app for violating the State’s strict fiduciary duty rule that requires broker-dealers to act in the best interest of their clients. Galvin raised three different violations against Robinhood that allegedly fell short of the new strict fiduciary standard. This new rule, passed in February 2020, was created in response to the Securities and Exchange Commission’s Regulation Best Interest (Reg BI), which Massachusetts believed did not go far enough. Reg BI bars brokers from putting their own financial interest above those of their clients, but fails to define what it means to act “in the customers’ best interest” or mandate that brokers recommend a single best product. While Reg BI requires the disclosure and mitigation of conflicts of interest, Massachusetts felt this requirement was also lacking. Galvin stated that Reg BI is “basically a souped-up version of the suitability standard,” and felt a new State rule was necessary to protect the growing crowd of young investors in the State. During this past year, due to COVID-19 and other meme-based investment activities on the application, Robinhood accumulated over 3 million new users in the first four months of 2020. Galvin’s concerns revolve around the 500,000 customers in Massachusetts, with accounts totaling over $1.6 billion.

Continue reading “Robinhood vs. Massachusetts’ Secretary of the Commonwealth: A Battle for the Ages over Massachusetts’ New Strict Fiduciary Duty Rule”

New York Insurance Regulation 187 Found Unconstitutional: Now What? A Faegre Drinker Podcast

On April 29, 2021, the State of New York Supreme Court Appellate Division in the Third Judicial Department issued an Opinion and Order finding that the amendment to New York Insurance Regulation 187 was unconstitutionally vague. In this Faegre Drinker podcast, a cross-disciplinary team of our attorneys discusses the preliminary implications of this important decision.

Upcoming Webinar | DOL Investigations of Registered Investment Advisers Under ERISA – What Should You Know? What Can You Do?

Investigating financial service providers to 401(k), 403(b) and other retirement plans for compliance with ERISA remains an area of focus for the U.S. Department of Labor (DOL) Employee Benefits Security Administration.

Join members of Faegre Drinker’s ERISA financial services team on April 27 from noon to 1:00 p.m. CT, as we explore what registered investment advisers can expect if they are selected for an investigation and best practices for getting through an investigation and negotiating a favorable resolution as quickly and painlessly as possible. While the focus will be on RIAs, this session should be informative for broker-dealers and dual registrants as well.

Continue reading “Upcoming Webinar | DOL Investigations of Registered Investment Advisers Under ERISA – What Should You Know? What Can You Do?”

Risky Business: SEC Risk Alert Highlights Broker-Dealers’ Anti-Money Laundering Miscues and Encourages Firms to Beef Up Protection

Ben Franklin once said “by failing to prepare, you prepare to fail.” Based on the SEC’s latest risk alert concerning broker-dealers’ anti-money laundering (AML) compliance (or lack thereof), some firms would be well served to heed Mr. Franklin’s advice.

The SEC specifically seeks to examine broker-dealers’ compliance with the various regulations and laws governing firms’ AML obligations. The risk alert highlights the SEC’s observations relating to firms’ deficiencies concerning (a) AML policies and procedures and internal controls; and (b) suspicious activity reporting (SAR). The SEC’s emphasis on AML should come as no surprise, as the SEC has previously included it as an exam priority. FINRA has additionally provided broker dealers with extensive AML guidance.

Continue reading “Risky Business: SEC Risk Alert Highlights Broker-Dealers’ Anti-Money Laundering Miscues and Encourages Firms to Beef Up Protection”

Recent State Fiduciary Duty Developments: Idaho, North Dakota and Ohio

Idaho and North Dakota have adopted wholesale the National Association of Insurance Commissioners’ (NAIC) model suitability standard. Ohio also finalized its proposed rule adopting the NAIC model rule. This brings to six the number of states that have adopted the NAIC model (Arkansas, Delaware, Idaho, Michigan, North Dakota and Ohio), and three others have proposed to do so (Kentucky, Maine, and Nebraska).

Continue reading “Recent State Fiduciary Duty Developments: Idaho, North Dakota and Ohio”

SEC Exams for 2021 to Focus on Climate and ESG, Reg BI, Crypto, & More

The SEC’s Division of Examination’s (formerly OCIE) annual announcement of its exam priorities is always noteworthy. It provides helpful insight into this division’s thinking and can serve as a roadmap for regulated entities to focus their compliance and supervision planning. The announcement of these priorities is even more important following a change in the presidential administration and the changes at the Commission that inevitably follow. Not surprisingly, the recently announced Division of Examination priorities for 2021 (summarized below) align with the Biden Administration’s policy priorities and key trends in the financial landscape.

Continue reading “SEC Exams for 2021 to Focus on Climate and ESG, Reg BI, Crypto, & More”