The Maryland Senate Finance Committee has overwhelmingly voted to recommend the rejection of a pending fiduciary bill that would have held brokers and related individuals to those standards.

Ten out of the 11 committee members voted in favor of a motion to consider the bill as “unfavorable,” effectively a recommendation to the full Maryland Senate floor to reject the proposed legislation. The remaining committee member was excused from voting.

Maryland Senate Bill 786 – The Financial Consumer Protection Act of 2019 – was introduced by State Senators Jim Rosapepe, Susan Lee, Bill Ferguson and Mary Washington before the General Assembly of Maryland on February 4.

The bill covers a wide scope of consumer protections. This includes holding broker-dealers, broker-dealer agents, insurance providers, investment advisors, federal covered advisors and investment advisor representatives to a fiduciary standard and requires them to “act in the best interest of the customer without regard to the financial or other interest of the person or firm providing the advice.”

The Insured Retirement Institute welcomed the defeat of the bill on the committee level.

In a statement, the IRI says the bill was designed to “impose sweeping, ill-defined burdens on financial advisors.”

IRI testified to oppose the bill at a March 13 hearing saying lawmakers should work with federal regulators and within a process through the National Association Insurance Commissioners to achieve regulatory consistency.

IRI says the Maryland Senate should also collaborate with the SEC, which is already in the process of finalizing its proposed Regulation Best Interest.

“This is the right outcome given the extraordinary regulatory activity on this issue” by the SEC and NAIC,” Jason Berkowitz, IRI’s chief legal and regulatory affairs officer, says in the statement.

“Maryland now has an opportunity to participate in a constructive dialogue with other interested regulatory bodies to establish consistent and clear standards for recommendations made with respect to all securities and insurance products,” he adds.

But Barbara Roper, the Pueblo, Colo.-based director of investor protection at the Consumer Federation of America, expressed frustration over the outcome.

“This is disappointing, but not surprising. Industry has shown itself to be very effective at killing any initiative that would actually make them accountable for acting in their customers’ best interests,” Roper says. “The Maryland proposal was by far the strongest proposal we’ve seen and thus most threatening to industry."

Roper had praised the Maryland bill because unlike the SEC’s pending Regulation Best Interest, it covers “the full range of financial professionals who provide investment advice and then sets an appropriately high standard of conduct for that advice.”

The SEC is working with states that have fiduciary rule initiatives to avoid conflicts with the final version of the SEC’s Regulation Best Interest, Brett Redfearn, director of the regulator’s Division of Trading and Markets, said last month at the Sifma Compliance and Legal Seminar in Phoenix, Ariz.

“We’re taking in a lot of inputs from the states. We’re communicating with them as much as possible. We’re looking for the best possible way of resolving this so there aren’t those sorts of conflicts,” Redfearn said at the time.

William Heyman, Baltimore-based principal at Heyman Law Firm, previously told FA-IQ that having multiple state-centric rules governing the conduct of brokers won’t be good for the broker-dealer industry or the public at large. Heyman believes a national standard is still the best option.

New Jersey, Nevada and Connecticut are among the states which have also set forth on their own fiduciary rule initiatives after the Department of Labor’s fiduciary rule was vacated in Federal court last year.