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Massachusetts Securities Division Rolls Out Final Version of Fiduciary Duty Rule

The Massachusetts Securities Division (the “Division”) has announced that they will begin to apply a fiduciary conduct standard to broker-dealers and agents when dealing with their customers. Once adopted, the Division has stated that the failure of a broker-dealer or agent to adhere to the fiduciary conduct standard of utmost care and loyalty when dealing with their customers shall be deemed a dishonest or unethical practice pursuant to the Massachusetts Securities Act.[1] The heightened standard, as compared to the SEC’s Regulation Best Interest Rule (“Reg. BI”), is to be adopted on March 6, 2020. The Division’s enforcement of the new fiduciary standard shall begin on September 1, 2020.

In doing so, the Division is adopting amendments to 950 MASS. CODE REGS. 12.200 (the “Regulations”) as they relate to the standard of conduct applicable to broker-dealers and agents. The adopted amendments to the Regulations (the “Final Regulations”), revise certain paragraphs in Section 12.204 to make clear that the existing suitability standard still applies to any relationships or transactions expressly excluded from the fiduciary conduct standard.[2] 

Both regulators and the plaintiffs’ bar have argued that Reg BI does not go far enough to protect investors, particularly because it does not confer a fiduciary designation onto broker-dealers. Massachusetts addresses this criticism with the implementation of the new standard, which obligates broker-dealers and agents to give recommendations and advice “without regard to the financial or any other interest of any party other than the customer.” In addition, this rule obligates broker-dealers and agents to disclose, avoid, eliminate and mitigate any conflicts of interests. The new rule specifically states that disclosing conflicts alone does not meet or demonstrate the duty of loyalty.

This, of course, comes nearly two years after the U.S. Court of Appeals for the Fifth Circuit struck down the Dept. of Labor’s attempt to expand ERISA’s fiduciary standards, arguing that the government overreached by requiring broker-dealers to act in their clients’ best interest.[3] In the adopted amendments, the Division states that the higher standard does not apply to fiduciaries under ERISA.

Massachusetts’ strict fiduciary standard will have a significant impact on licensed broker-dealers and agents in the state. It creates a higher standard for those broker-dealers and agents licensed in Massachusetts, as opposed to the SEC’s Reg BI. In doing so, it raises concerns regarding a different regulatory landscape applied to broker-dealers and agents in Massachusetts, as opposed to other states. An important question that remains unanswered is whether Reg BI will preempt individual state efforts to change the legal obligations of a broker-dealer in their respective state. The SEC has not provided guidance on the issue.

[1] See M.G.L. c. 110A, § 204(a)(2)(G).

[2] See Amendments to Standard of Conduct Applicable to Broker-Dealers and Agents – 950 Mass. Code. Regs. 12.200, Massachusetts Securities Division, available at

[3] See Fifth Circuit Court of Appeals Invalidates the 2016 Final Department of Labor Fiduciary Rule and Related Prohibited Transaction Exemptions, available at

©1994-2020 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.National Law Review, Volume X, Number 63


About this Author

Pete S. Michaels MIntz Member Securities Litigation White Collar Defense & Government Investigations Arbitration, Mediation,

Pete focuses his practice on securities litigation, regulatory proceedings involving financial service companies and products, and compliance matters. He represents multinational and regional financial services firms, including banks, broker-dealers, investment advisers, mutual fund firms, and insurance companies as well as their employees, directors, and officers.

Pete’s extensive experience with securities disputes includes class actions, state and federal court cases, arbitration, and related employment matters. He also represents clients before a wide range of federal, state and...

Michael E. Pastore Of Counsel Mintz Class Action Securities Litigation White Collar Defense & Government Investigations Arbitration, Mediation, ADR
Of Counsel

Michael focuses his practice on representing banks, financial services, and other companies in litigation and government proceedings involving consumer protection and other laws. He also handles arbitrations and guides clients through government and internal investigations. He represents publicly traded companies in a variety of industries, including retail and manufacturing, as well as Internet start-ups.

Michael’s extensive experience with consumer protection laws includes the Fair Credit Reporting Act (FCRA), Fair Debt Collection Practices Act (FDCPA), Truth in Lending Act (TILA), and Massachusetts’ consumer protection law, M.G.L. c. 93A. He represents and defends clients before federal and state agencies: the Consumer Financial Protection Bureau (CFPB), the Securities and Exchange Commission (SEC), the Financial Industry Regulatory Authority (FINRA), the US Department of Justice (DOJ), the US Food and Drug Administration (FDA), the Massachusetts Attorney General’s Office, and the Massachusetts Securities Division.

Jason L. Burrell Associate Complex Commercial Litigation Financial Institution Litigation White Collar Defense & Government Investigations Securities Litigation Class Action Health Care Enforcement & Investigations

Jason practices in the firm’s litigation section, and has experience in complex commercial litigation, including representing financial institutions, closely-held corporations and publicly traded companies. Additionally, Jason has experience drafting discovery responses and conducting and managing confidential document review for production. Jason has also worked on matters relating to investor disputes, government investigations, and enforcement proceedings.

During law school, Jason served as editor-in-chief of the Northeastern University Law Review. Also, Jason was a...

David L. Ward Member Securities Litigation White Collar Defense & Government Investigations Complex Commercial Litigation Arbitration, Mediation, ADR

David Ward focuses his practice on financial services regulatory matters, internal investigations and related litigation. He represents financial services clients throughout the United States, including broker-dealers, investment advisors, banks, pension consultants, insurance companies and publicly traded entities before the SEC, FINRA, CFTC, U.S. Department of Justice and state regulators. David regularly assists clients in internal investigations; the defense of regulatory investigations, sales practice issues, corporate governance matters and securities-related litigation in state and...