5 Key Issues Impacting Firms, Advisors and Clients Across the States

While federal laws and agency rules make national headlines, issues closer to home can often have as much, if not more, influence over our members’ businesses. That’s why we continue to advocate for our members and their clients in statehouses nationwide. 

To that end, our state advocacy team has engaged on several issues during the first half of the year. They include state taxes, protecting vulnerable investors, financial literacy initiatives, fiduciary standard of care, ESG disclosure and, of course, independent contractor rules.

State Taxes

Once again, New York introduced a stock transfer tax that would impose levies on equity, bond and derivative sales. We strongly opposed this bill. While it looks like it will not move forward, we will continue to fight against this type of tax. It’s counterproductive and sets a terrible precedent for other states.

We were also one of the organizations against a California proposal taxing an individual’s net worth, including any unrealized gains. The bill does not seem to be going anywhere, but we will continue to monitor the situation, as it would have severe repercussions for our members and their clients.

And we continue to implore Tennessee to modify or repeal its long-standing professional privilege tax, which imposes a $400 annual fee on certain professions, including registered representatives and investment advisers. We believe this is an unfair burden that impacts not only our Tennessee-based members but anyone with clients living there.

Protecting Vulnerable Investors

Two-thirds of the states have enacted legislation or regulations based on the North American Securities Administrators Association’s (NASAA) Model Rule to protect seniors and vulnerable investors from financial exploitation. We supported a bill that passed in Georgia this year. Moving forward, we are currently putting our influence behind a similar effort in Wisconsin and starting to lay the groundwork for legislation in New York. We will continue to advocate for measures to protect the vulnerable until all 50 states write these protections into law.

Fiduciary Standard of Care

States, working through NASAA, have been monitoring how Reg BI is unfolding and are looking to develop a model rule that would address issues around a standard of care for investors. Colorado, however, has already adopted its own standard of care. Though it’s very similar to Reg BI, we raised concerns that it could invite confusion, non-uniform interpretation and regulatory risk. 

ESG Disclosure 

Out of concern that ESG considerations are sometimes influencing recommendations and advice without investors’ being aware, Missouri recently adopted a rule that requiring notice and written consent, before an advisor can take into account a social or nonfinancial objective into a discretionary decision to buy or sell a security. The notice and consent must come at the outset of the advisor-client relationship or before any recommendation or discretionary transaction – and would be required to be sent and signed by the client every three years. 

We joined a coalition opposing this regulation because we believed the administrative burden could significantly impact our members’ businesses and clients. Missouri issued the rule despite these objections. It goes into effect on July 30.

Independent Contractor Status

While the independent contractor rule continues to be a major issue at the federal level, states have been mostly quiet on the topic this year. In New York however, the legislature continues to discuss providing greater protections for gig-economy workers and their efforts could have significant implications for our industry.

We are engaged in ongoing dialogue with lawmakers and their staffs to make it clear that if independent financial advisors have to reclassify as employees, the additional costs and compliance burdens would impede their ability to provide the advice, products and services their clients need to save for retirement. 

Remaining Vigilant

We will remain vigilant when it comes to proposed legislation and rulemaking in the states. We will continue to advocate for outcomes that are fair to our members and consistent with our mission of ensuring that all individuals have access to competent and affordable financial advice, products and services.