The New Jersey Bureau of Securities (the "Bureau") proposed a uniform fiduciary standard for broker-dealers and investment advisers doing business with New Jersey residents. Under the proposal, a firm would be obligated to satisfy both a duty of loyalty and a duty of care. Failure to comply with the fiduciary standard would constitute a "dishonest or unethical practice."
The proposal would apply to a very broad range of transactions and activities, including "the opening of, or transfer of, assets to any type of account."
To satisfy the duty of care, a broker-dealer would be required to make "reasonable inquiry, including risks, costs, and conflicts of interest related to the recommendation or investment advice, and the customer's investment objectives, financial situation, and needs, and any other relevant information."
Any firm that is dually registered as a broker-dealer and investment adviser would be subject to a fiduciary duty to its customers even where it is not acting as an adviser.
The Bureau notes that a firm cannot presume that the disclosure of a conflict of interest will satisfy its duty of loyalty to the client. Further, transaction-based fees would be allowed in certain circumstances, provided that the "fee is reasonable" and is the "best of the reasonably available fee options for the customer."
Comments on the proposal must be submitted to the Bureau by June 14, 2019.