Maryland Takes a Step Back on Fiduciary Rule

By Joseph Caruso • March 21, 2018 • 0 Comments
For the moment, anyway, the Old Line State has stepped back crossing a line that would have established its own fiduciary rule.

On March 19, the Financial Consumer Protection Act of 2018 (MD SB 1068) passed out of the Maryland Senate Finance Committee favorably with amendments just a week after the companion bill (MD HB 1634) successfully passed through the House of Delegates with similar modifications.

As initially drafted, the Financial Consumer Protection Act of 2018 would have created a fiduciary duty for broker-dealers, insurance agents, and investment advisers to act ‘primarily for the benefit of its clients.’ Not only would this provision have further complicated the regulatory burden for firms and professionals alike, but the fiduciary standard it would have established could have resulted in a preemption conflict with ERISA1.

In early March, the American Retirement Association government affairs team reached out to the lead sponsor of SB 1068, Sen. Jim Rosapepe (D), to communicate our concerns regarding preemption. Rosapepe subsequently referred us to the Office of the Maryland Attorney General with whom we have arranged a meeting to further communicate our position. Those concerns were heard as the Senate version of the bill strikes the fiduciary obligation and now directs the Maryland Financial Consumer Protection Commission to study:

1. The DOL rule and any Securities and Exchange Commission actions in addressing conflicts of interest of broker-dealers offering of investment advice by aligning the standard of care for broker-dealers with that of the fiduciary duty of investment advisers
2. Changes to State law to provide the protection intended by the U.S. Department of Labor conflicts of interest rule addressing fiduciary duty standards of care

The latter point remains a potential area of concern, particularly on the heels of the recent 5th Circuit ruling striking down the Department of Labor’s (DOL) fiduciary rule. Massachusetts Commonwealth Secretary William Galvin, the state’s top securities regulator, has already said that “If the Department of Labor will not enforce its own laws and rules, then the states must do what they can to protect retirees from firms who believe they can play with peoples’ life savings…”

We’ll continue to work with the regulators and legislatures in Maryland and other states on this and other initiatives as the status of the DOL’s fiduciary rule continue to develop.

Joseph A. Caruso, III, JD, MSPPM, is Government Affairs Counsel for the American Retirement Association.


1Section 514 of ERISA provides that ERISA supersedes any and all state laws insofar as they relate to any employee benefit plan.