Strengthening the Industry: FSI’s Commitment to State-Level Advocacy

This year, much of the industry has been laser-focused on regulatory developments at the federal level. And with good reason. The Department of Labor’s fiduciary and independent contractor rules have the potential to upend our members’ businesses and how – or if – investors across the country get advice.

Yet, plenty is going on at the state level that deserves attention. It’s easy to think that proposals in other states don’t impact you or your clients, but state lawmakers often take cues from their peers in different parts of the country.

In other words, what a state legislator or regulator in Kentucky does could eventually impact, for better or worse, your business, even if you live in Colorado. With that in mind, let’s look at some of our most pressing state advocacy initiatives.

ESG Rules

In August, we secured a victory when a federal judge blocked a Missouri rule that compelled advisors to provide clients with notice and secure written consent when using ESG or nonfinancial objectives to buy a security.

The ruling comes after FSI advocated strongly against the rule when it was under consideration in the Missouri legislature. At the time, we told lawmakers that it did not offer meaningful investor protections and introduced an added – and needless – layer of complexity for firms and advisors.

Given the stakes, we submitted a joint brief in support of a Securities Industry and Financial Markets Association (SIFMA) lawsuit to block the regulation. In it, we noted that Congress limited states’ ability to regulate national markets nearly 30 years ago. Because of that, we believed Missouri had overstepped its bounds in adopting the rule. The court agreed.

Notably, FSI has successfully thwarted similar efforts in other states, including Tennessee and Kentucky. Meanwhile, in Wyoming, we played a role in common-sense modifications to an ESG proposal that included an affirmative consent requirement that would have entailed extra paperwork. The governor eventually replaced it with a simple disclosure, partly thanks to our efforts.  

To be clear, FSI does not have a position on the merits of ESG investing. That’s for advisors and their clients to decide. However, we do have strong convictions about rules or laws that create burdensome administrative requirements for the industry, especially when they disproportionately impact particular products or investments over others, thus impacting investors’ ability to choose solutions that best meet their needs.

Deceptive Practices Legislation

New York legislators pursued a bill to beef up protections in the state against businesses that employ “unfair and deceptive acts and practices.” While well-intentioned, our concern was that the measure fails to adequately define what constitutes an “unfair” or “abusive” act or practice, leaving those terms up for broad interpretation.

Because of that, we believed the bill would invite plaintiffs to file speculative lawsuits against business owners in New York, including our members. In response, we unleashed an aggressive advocacy campaign against it. As part of that effort, we rallied our New York members, asking them to contact their state assembly members, senators and the governor to let them know the proposal would pose unnecessary risks to their businesses.

In response to our efforts and arguments that New York and federal law already provide ample protections for investors, an exemption for broker-dealers and investment advisers was added to the legislation. Ultimately, the bill failed when the legislature adjourned without the Senate and Assembly agreeing on the proposal, giving us an important advocacy victory in the state.

Financial Literacy Initiatives

For years, we have been committed to improving financial literacy nationwide, starting in the schools. Sadly, only about half of the states require some form of financial education. We will continue our efforts to ensure all states include basic personal finance in their curriculum. We’ve made good progress over the years, with many lawmakers being receptive to our message. But there is more work to do.

State Election Resources

Much of the above probably makes you think about the issues that may arise in your state, especially with the 2024 elections approaching.

To help you stay informed, our team is putting together election overviews for all 50 states, highlighting legislative and gubernatorial elections as well as key dates. The overviews also include information on state securities regulators.

Check out our State-Level Elections page for information on what’s happening in your state and others, as well as a full 50-state overview.

Get Involved Today

Our advocacy team is always hard at work. To learn more about FSI’s advocacy and get involved, visit our Advocacy Action Center or email [email protected].