Massachussetts Securities Division Issues Fiduciary Conduct Rule FAQ’s
May 20, 2020 by Potomac Law Group PLLC
The Massachusetts Securities Division has released responses to fifteen questions concerning the fiduciary conduct regulation for broker-dealers and their agents it issued in February. 950 Code of Massachusetts Regulations § 12.207. While some of the responses essentially repeat what is in the regulation or the accompanying Adopting Release, some are notable for the clarification, or lack thereof, they provide.
Insurance Products. For example, Questions 3 and 13 (they are identical, as are the responses) ask, “Which financial professionals and products are not covered under the Regulations?” The response: “The Regulations do not cover licensed insurance agents (unless selling or providing advice relative to securities) or insurance products (unless they relate to securities).” The latter ambiguous parenthetical qualification seems at odds with the Adopting Release (at page 2) which notes that comments on the proposed regulation pointed out that the definition of “security” in the Massachusetts Uniform Securities Act (Mass. Gen. Laws ch. 110A, § 401(k)) explicitly excludes “any insurance or endowment policy or annuity contract under which an insurance company promises to pay money either in a lump sum or periodically for life or for some other specified period.” In deference to those comments, the Adopting Release states, “the Division has removed the express language regarding advice on . . . insurance products from the Final Regulations.”