In the wake of the demise of the Department of Labor’s (“DOL”) fiduciary rule, New Jersey is going forward with a plan to impose its own fiduciary rule on brokerage and advisory professionals. On September 17, 2018, New Jersey Governor Phil Murphy announced a plan for using the broad rulemaking authority of the New Jersey Bureau of Securities (the “Bureau”) in order to administratively create a uniform fiduciary standard applicable to both investment advisors and brokerage firms doing business in New Jersey.

As announced, Governor Murphy has directed the Bureau to issue a proposed regulation that would subject both broker-dealers and investment advisors doing business in New Jersey to a uniform fiduciary standard of conduct. Governor Murphy said he was directing the Bureau to propose new rules establishing a uniform fiduciary standard in New Jersey because of his dissatisfaction with recent activity at the federal level, specifically the Trump Administration’s decision to abandon the defense of the DOL’s fiduciary rule, and his view that the Securities and Exchange Commission’s (“SEC”) proposed Regulation Best Interest announced in April 2018 would not sufficiently protect New Jersey investors.

The Bureau is expected to publish the fiduciary rule pre-proposal in the New Jersey state register on October 15, 2018. The proposed rule would then be subject to a 60 day period for public comment, ending on December 14, 2018. During the public comment period, the Bureau will hold two informal, in-person conferences to solicit public input on the proposed regulation, with the first conference being held on November 2, 2019 and the second conference being held on November 19, 2018.

Other than raising the level of conduct required by a broker-dealer beyond the current suitability standard established by the Financial Industry Regulatory Authority, Governor Murphy did not offer any details as to the contours of the proposed regulation. Nonetheless, in light of the dissatisfaction expressed by the Governor as to the Trump Administration’s abandonment of the defense of the DOL fiduciary rule and the SEC’s proposed Regulation Best Interest, we expect that the proposed uniform fiduciary standard will seek to impose a standard of conduct much closer to the DOL fiduciary rule. It will likely extend beyond proposed Regulation Best Interest’s requirement that non-fiduciary investment advisors plainly disclose their lack of fiduciary status with the client.