The American Retirement Association, the parent organization of NAPA, has filed a comment letter raising concerns about the application of a new fiduciary regulation in the state of Nevada.
The comment letter includes a legal analysis conducted by the law firm of Trucker Huss that concludes that courts would find that the Nevada statute is preempted by ERISA to the extent it seeks to regulate financial advisers who provide services to a retirement plan governed by ERISA, to the plan’s fiduciaries and/or to the plan’s participants or beneficiaries.
Nevada Senate Bill 383, signed into law by Gov. Brian Sandoval (R) on June 2, revises the Nevada Securities Act to mandate that any “broker-dealer, sales representative, investment adviser or representative of an investment adviser shall not violate the fiduciary duty toward a client” imposed by another statute, NRS 628A.010, which imposes the “duty of a fiduciary” on all financial planners. However, Senate Bill 383 also modifies the definition of “financial planner” to remove what had been an exclusion from that category for broker-dealers and their representatives and investment advisers and their representatives.
After outlining the provisions of the Nevada statute, the comment letter submitted by the American Retirement Association provides a brief history of ERISA’s regulation of fiduciaries, as well as the reach and bounds of ERISA’s general preemption provision (which, simply stated, holds that the federal law supersedes any and all state laws as they relate to employee benefit plans).
The letter concludes by expressing the belief that “courts would find that Nevada law, as amended by [Senate Bill 383], would be preempted by ERISA to the extent it relates to services provided by a “financial planner” to an employee benefit plan governed by ERISA, the fiduciaries of an ERISA plan and/or the plan’s participants and beneficiaries.” Similarly, it states that any state-law claims relating to those services would also be preempted.
The letter suggests that it would be prudent for the regulators overseeing implementation of the new law to “expressly exempt services provided to an ERISA-governed employee benefit plan, the fiduciaries of the plan and/or to the plan’s participants and beneficiaries from the reach of Nevada law as amended, in recognition of the preemption of that law in this regard by ERISA.”