Aging Committee

JOINT FAVORABLE REPORT

Bill No.:

SB-265

Title:

AN ACT CONCERNING THE PROTECTION OF CONSUMERS WHO RECEIVE INVESTMENT ADVICE FROM FINANCIAL ADVISORS.

Vote Date:

3/8/2016

Vote Action:

Joint Favorable Substitute

PH Date:

3/3/2016

File No.:

SPONSORS OF BILL:

Aging Committee

Sen. Mae Flexer, 29th Dist.

Rep. Cara Christine Pavalock, 77th Dist.

REASONS FOR BILL:

To provide protections for consumers who receive investment advice from financial advisors.

The bill requires financial advisors to provide a signed written statement to an investor with the following information at least once annually: (1) fiduciary duties of the financial advisor, (2) expected compensation for the financial advisor, (3) fees related to investment products, (4) whether such advisor is currently licensed or registered to give such advice pursuant to state or federal law, (4) any educational degrees or certifications held by such advisor, and (5) any actual or potential conflicts of interest such advisor may have.

Substitute Language – LCO# 2921

Substitute language (1) requires financial planners not otherwise regulated by federal law to disclose, upon request, whether they have fiduciary duty; (2) prohibits financial planners from implying they have expertise with senior citizens unless they have a certificate or title in accordance with section 36b-4 of the general statutes; and (3) requires the Department of Consumer Protection, in consultation with the Commissioner of Banking, to list certified financial planners and registered investment advisers on their website.

RESPONSE FROM ADMINISTRATION/AGENCY:

Jorge L. Perez, Commissioner, State Department on Banking: Opposes the bill. This bill may create unintended consequences on state or federally registered Investment Advisors. Federal law may preempt parts of the bill. The State Department on Banking requests that some terms be further defined regarding which individuals are subject to the bill.

NATURE AND SOURCES OF SUPPORT:

None

NATURE AND SOURCES OF OPPOSITION:

David Belleaire, Executive Vice President & General Counsel, Financial Services Institute: This bill will create an overly complicated and duplicative disclosure regime. Congress has preempted states from establishing unique book and recordkeeping obligations.

Kim Chamberlain, Manager Director and Associate General Counsel, Securities Industry and Financial Markets Association: The United States Department of Labor is currently finalizing a proposed rule that would expand the definition of fiduciary under the Employee Retirement Income Security Act and recommends that the committee not move forward with a fiduciary disclosure proposal until the shifting federal landscape has settled.

Connecticut Bankers Association: Financial advisors and their firms are regulated by the Securities and Exchange Commission and locally by the Department of Banking. Section 103 of the National Securities Markets Improvement Act of 1996 preempts states from enacting regulations relating to making and keeping records.

Eric George, President, Insurance Association of Connecticut: This bill will influence prospective clients to make decisions as to whether or not hire a financial advisor based solely on which advisor is least expensive.

Kate Kiernan, Vice President, Chief Counsel and Deputy, State Relations, American Council of Life Insurers: This bill conflicts with existing U.S. Securities and Exchange Commission requirements as these requirements are fully duplicative of existing state and federal requirements.

John Sayour, National Association of Insurance and Financial Advisors: The title and language of the bill may have unintended consequences as it creates the unfair implication that all of Connecticut's Financial Advisors are to be viewed negatively.

Reported by: Amy Linskey/Robin Bumpen

Date: 3/10/2016