OLR Bill Analysis

sSB 265

AN ACT PROTECTING THE INTERESTS OF CONSUMERS DOING BUSINESS WITH FINANCIAL PLANNERS.

SUMMARY:

This bill establishes advertising and disclosure requirements applicable to financial planners who are not subject to certain federal laws concerning investment advisors, securities, and retirement products. The bill extends to these financial planners a prohibition against using, in connection with an agreement to provide financial planning or investment advice for compensation, a certificate, professional designation, or form of advertising expressing or implying special training, education, or experience in advising or serving senior citizens without meeting certain educational requirements (see BACKGROUND). Existing state law already imposes this prohibition on individuals involved in securities transactions.

The bill also requires financial planners to disclose to consumers, upon request, whether they have a fiduciary duty with regard to each recommendation they make.

The bill defines (1) “financial planner” as a person offering individualized financial planning or investment advice to a consumer for compensation who is not otherwise regulated by the federal Employee Retirement Income Security Act (ERISA), Investment Advisers Act, or Securities Exchange Act and (2) “fiduciary duty” as a duty to act with prudence in the consumer's best interest and with undivided loyalty to him or her.

The bill also requires the consumer protection commissioner, in consultation with the banking commissioner, to post on the Department of Consumer Protection (DCP) website, a list of:

1. Connecticut financial planners and financial planning professionals required to act in a consumer's best interest pursuant to certification by the Certified Financial Planner Board of Standards and

2. investment advisers required to act in a consumer's best interest by the Connecticut Uniform Securities Act.

The DCP commissioner must also include on the website information about a consumer's right to ask financial planners or other financial planning professionals to disclose fees and compensation as required under state and federal law.

The bill also includes a severability clause, specifying that any provision of the bill rendered invalid does not affect remaining provisions.

EFFECTIVE DATE: Upon passage

BACKGROUND

Educational Requirements for Individuals Advertising Experience with Senior Citizens

By law, individuals offering, selling, or purchasing securities are prohibited, in connection with an agreement to provide financial planning or investment advice for compensation, from using a certificate, professional designation, or form of advertising expressing or implying special training, education, or experience in advising or serving senior citizens unless the individual has met certain educational criteria. They must receive a certificate, title, or designation by completing a course of study that:

1. resulted in an academic degree from an accredited higher education institution in a field related to advising or serving senior citizens, as determined by the banking commissioner or

2. relates to advising or serving senior citizens, as determined by the commissioner, and is provided by an organization accredited by the American National Standards Institute, National Commission for Certifying Agencies, an organization recognized as an accrediting agency by the United States Department of Education, or another organization approved by the commissioner (CGS 36b-4(c)).

Individuals with these credentials are prohibited from using them in an untrue, deceptive, misleading, or false manner.

Related Federal Laws

Many individuals providing financial advice are regulated by federal laws, including ERISA and the Securities Exchange Act, among others. The applicability of federal law depends on the type of financial advice, service, or investment offered. Many of these laws require advisors to disclose certain fee and compensation information, establish penalties for fraudulent conduct, and impose a fiduciary duty.

Related State Laws

Existing law regulates the conduct of many financial advisors. For example, the Connecticut Uniform Securities Act (CGS 36b-2 et seq.) generally prohibits, in connection with the offer, sale, or purchase of a security, individuals from (1) engaging in fraud or deceit, (2) making untrue or misleading statements, or (3) engaging in a dishonest or unethical practice. It also requires “investment advisors” to disclose certain compensation and fee information. Investment advisors, for compensation and as part of a regular business, advise others regarding securities transactions.

And Insurance Department regulations prohibit insurance producers (i.e., agents) from using senior citizen specific certifications or professional designations to mislead a purchaser when (1) soliciting, selling, or purchasing life insurance or annuities; (2) providing advice about purchasing or selling life insurance or annuities; or (3) issuing reports or analyses on life insurance or annuities (Conn. State Agencies Regs. 38a-432b-2).

COMMITTEE ACTION

Aging Committee

Joint Favorable Substitute

Yea

12

Nay

1

(03/08/2016)