Galvin Gets His Way in Scottrade Fiduciary Case
Massachusetts’s top securities cop has won a major battle in his fiduciary rule case against Scottrade. As requested by Secretary of the Commonwealth William Galvin, a judge has remanded the case to a state administrative proceeding, according to ThinkAdvisor.
Judge Nathaniel Gorton, the U.S. District Judge for the U.S. District Court for the District of Massachusetts, ruled yesterday that “federal ingredient jurisdiction is not present in this case,” in part because the court did not need to assess the Department of Labor’s fiduciary rule in determining whether Scottrade’s employees violated the company’s policies, the publication writes, citing Gorton’s ruling.
Galvin charged Scottrade in February, saying the firm’s sales practices violated its own policies and the DOL’s rule. The Obama-era regulation, which purported to require retirement account advisors to put clients’ interests first and went into partial effect last June, was tentatively vacated in an appeals court in March and officially vacated in June.
Since March, Scottrade has argued that Galvin was overstepping his authority “to enforce the fiduciary rule because the federal government would not” and that the case should be removed to a federal court.
In response, Galvin’s lawyers filed a brief in June arguing the case should be heard at the state level because of a long-established precedent that violations of a company’s own policies makes the firm liable under state law.
Scottrade had also argued the case against it is related to the Employee Retirement Income Security Act and the proper forum for such cases is the federal courts, ThinkAdvisor writes. But Gorton ruled that ERISA doesn’t completely preempt the state law claim, according to the publication.