With full implementation of the DOL Fiduciary Duty Rule pushed back to July 1, 2019, questions linger as to whether the Rule will survive at all and, if so, to what extent. Now, state agencies and lawmakers are stepping into the breach to enact their own fiduciary duty rules for the financial services industry.
Nevada, for example, enacted a new law that subjects certain brokers and advisers to the state’s fiduciary duty rule. Connecticut has also passed a law requiring companies administering municipal 403(b)s, a type of defined-contribution plan not covered by ERISA protections, to disclose to each retirement-plan participant information regarding conflicts of interests and fees. There are reports that New York, New Jersey and Massachusetts may follow suit with their own fiduciary duty rules.
In light of these developments, you may want to consider whether your firm’s E&O policy will cover claims involving state fiduciary duty rules. (We previously discussed issues involving the DOL Fiduciary Duty Rule and your E&O coverage here.)
It may be wise to revisit any endorsement negotiated with your insurer to make sure it covers not only actions relating to the DOL Rule but also any similar statute, rule, or regulation requiring brokers and agents to adhere to a “best interest” rule or fiduciary standard.
Remember – it is always better to ask questions about your coverage before you need it.