Fiduciary Duties Would Expand Under Maryland Bills

Legislation before the Maryland legislature would expand fiduciary duties in the Old Line State for broker-dealers, agents and investment advisers.

SB 1068, introduced by Sen. Jim Rosapepe (D-Prince George’s) on Feb. 7 and HB 1634, introduced by Del. C. William Frick (D-Montgomery) two days later, would create a fiduciary duty for agents and investment advisers, as well as broker-dealers, to act ‘primarily for the benefit” of their clients.

The legislation provides that broker-dealers, agents and investment advisers are fiduciaries and that at the time any advice is given, they shall disclose:

• any gain, profit or commission they may receive if the advice is followed; and

• a legal or disciplinary event that is material to an evaluation of their integrity or ability to meet contractual commitments to clients.

The legislation also requires that they shall “make diligent inquiry” of each client to determine:

• the financial circumstances and obligations of the client initially;

• the financial circumstances and obligations of the client after the first contact with them; and

• the client’s present and anticipated obligations to the client’s family and for them and their goals.

The bills further would allow the Commissioner of Financial Regulation to adopt regulations to carry out these provisions, including regulations defining or excluding an act, practice or course of action by broker-dealers, agents or investment advisers and that would prevent them from engaging in acts, practices or courses of business that would violate the rules this legislation sets forth.