Welcome to Financial Advisor IQ
Follow

Scottrade Wants Fiduciary Suit in Federal Court

April 9, 2018

Scottrade is trying to remove the impartial conduct case against it filed by the Massachusetts Securities Division into federal court, ThinkAdvisor writes.

In February, Commonwealth Secretary William Galvin, the state’s top securities watchdog, said Scottrade’s sales contests for selling products and services to retirement account clients violated the firm’s own rules on impartial conducts.

On March 16 Scottrade filed to move the case to federal court, arguing Galvin is in effect trying to enforce the Department of Labor’s fiduciary rule, according to ThinkAdvisor. While Galvin’s suit “purports” to hold the firm accountable for a violation of the Massachusetts Securities Act, “it is clear on its face that the gravamen of these state law claims is that Scottrade allegedly failed to comply with the fiduciary rule and failed to make good-faith efforts to implement the rule,” Scottrade’s lawyers argue, according to the publication.

The DOL’s fiduciary rule, which purports to require retirement account advisors to put clients’ interests first, went into partial effect last summer but in March was vacated in appeals court. The DOL has since said that it will not be enforcing the rule “pending review.”

Galvin’s office tells ThinkAdvisor it’s challenging the removal and will seek that the case is remanded to the state.

However, it’s unclear whether the regulator will argue that it’s not trying to enforce the DOL’s rule given the statement Galvin gave at the time of the February charges against Scottrade: “If the Department of Labor will not enforce its own laws and rules, then the states must do what they can to protect retirees from firms who believe they can play with peoples’ life savings by conducting sophomoric contests.”

By Alex Padalka
  • To read the ThinkAdvisor article cited in this story, click here.