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Garden State Gets It: ARA

Fiduciary Rules and Practices

Consistent with prior input from the American Retirement Association, New Jersey correctly excluded ERISA plan fiduciaries from the application of its proposed new fiduciary standards.

In a June 14th comment letter, the ARA – parent organization of the National Association of Plan Advisors – expressed support for the proposed regulation’s recognition of ERISA’s preemption on such matters and its inapplicability to ERISA fiduciaries, and recommends that the New Jersey Bureau of Securities retain this exclusion when the proposed regulation is finalized.

The comment letter goes on to explain that while it continues to support an expanded fiduciary standard, a state-established standard is problematic for ERISA-covered retirement plans due to the potential for conflicting standards between state laws and those already in effect under federal law (ERISA).    

Proposed by the Garden State on April 15, the new uniform fiduciary standard would establish, by regulation, a common law fiduciary duty and apply it to broker-dealers and agents, and to codify it for investment advisers and investment adviser representatives, requiring such professionals registered with the Bureau to place their customers’ interests above their own when recommending securities or providing investment advice.

The ARA previously submitted a comment letter in October 2018 on the state’s pre-proposal and testified at  a conference held by the Bureau on November 2018, noting that, while it strongly supports a fiduciary standard, it contended that the application of such a standard under state law is very problematic for ERISA plans and that ERISA already provides a uniform body of benefits law and regulation that protect participants and beneficiaries from impermissible conflicts of interest.

The success in New Jersey notwithstanding, concerns remain regarding the status of other state initiatives, notably Nevada.