New Jersey public officials plan to introduce an Obama-era consumer protection law that would regulate the state’s investment brokers, Gov. Phil Murphy said.
The proposal, which will officially be unveiled by the New Jersey Bureau of Securities, would impose what would be called a fiduciary rule, requiring New Jersey broker-dealers to place their clients’ interests above their own when recommending investments, Murphy said.
“The fiduciary rule announced today would provide New Jersey with the strongest investor protections in the nation and send a clear message to Washington that New Jersey is committed to ensuring its residents are never again left vulnerable to the predatory financial practices that led to the economic collapse 10 years ago,” Murphy said in a prepared statement Monday.
Murphy said that many consumers assume every financial professional is required to provide unbiased advice, but in reality the rules only extend to investment advisors and their representatives.
“Most investors are unaware that broker-dealers and their agents often receive significant undisclosed financial benefits in exchange for steering clients toward certain investment products,” reads the Monday statement.
Following the 2008 recession, the Obama administration enacted a rule requiring retirement advisors to act in their client’s best interest, rather than their own.
Advisors couldn’t conceal conflicts of interest or steer investments toward funds in which the advisor has a vested interest. That was expanded to any professional making a recommendation in this area under the Obama rule.
The rule was challenged repeatedly in court before it was struck down in the Fifth Circuit Court of Appeals in New Orleans in March 2018. The Trump administration declined to appeal.