Massachusetts Adopts Fiduciary Standard for Brokers
Massachusetts has adopted a fiduciary rule for broker-dealers and their agents. The rule applies broadly to any investment advice or recommendation to any customer other than an institutional buyer. A broker has a continuing fiduciary obligation when the broker has investment discretion or has assumed a contractual obligation to monitor a client’s account. A broker must make reasonable inquiry into a client’s investment objectives, risk tolerance, and financial situation and disclose, avoid, eliminate and mitigate all conflicts of interest. The rule becomes effective on March 6, and enforcement commences on September 1.
Until courts resolve the potential conflict between the Massachusetts fiduciary standard and Regulation Best Interest, we recommend that brokers observe the (arguably) higher Massachusetts standard if they have customers there.