Nevada Imposes its Own Fiduciary Duty on Broker-Dealers and Advisers

The State of Nevada has imposed, effective July 1, 2017, its own fiduciary duty on investment advisers and broker-dealers (the “Law”).  Nevada’s Law is novel because: (i) it is the first time that a state has imposed a fiduciary duty on broker-dealers and their representatives and (ii) because it does not contain an exemption for SEC registered investment advisers, broker-dealers, and their representatives.

It is clear that investors are confused by the duties owed by investment firms, be they broker-dealers, investment advisers, or insurance producers.  The DOL fiduciary rule further clouded the differences since the same individual (broker) may have a different duty to the client depending on whether an account is a retirement account or not.  Dodd-Frank gave the SEC the ability to impose a fiduciary duty on brokers and the Commission has discussed doing so (or not) for years.  We expect that other states will follow Nevada’s lead and engage in state activism until the SEC makes a determination to pursue a fiduciary duty for brokers, or has at least affirmatively declines to pursue such a rule.

Members of MarketCounsel’s compliance management programs can find more information on the Law, including the enforceability and requirements of the Law, on RIAglass.

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