Relates to mandating greater levels of disclosure by non-fiduciaries that provide investment advice; requires signed acknowledgement of disclosure informing clients that the advisor owes no fiduciary duty.
STATE OF NEW YORK
________________________________________________________________________
1026
2021-2022 Regular Sessions
IN ASSEMBLY
January 7, 2021
___________
Introduced by M. of A. DINOWITZ, GOTTFRIED, STECK, PICHARDO, SEAWRIGHT,
BICHOTTE, COOK, COLTON, GALEF, THIELE -- Multi-Sponsored by -- M. of
A. DAVILA, GLICK, SIMON -- read once and referred to the Committee on
Judiciary
AN ACT to amend the general obligations law, in relation to mandating
greater levels of disclosure by non-fiduciaries that provide invest-
ment advice
The People of the State of New York, represented in Senate and Assem-bly, do enact as follows:
1 Section 1. The general obligations law is amended by adding a new
2 article 6 to read as follows:
3 ARTICLE 6
4 INVESTMENT TRANSPARENCY ACT
5 Section 6-101. Application.
6 6-102. Required disclosure.
7 6-103. Enforcement.
8 § 6-101. Application. The provisions of this article are applicable to
9 non-fiduciary investment advisors. Non-fiduciary investment advisors
10 are investment advisors not subject to a fiduciary standard under state
11 or federal laws or regulations or by any applicable standards of profes-
12 sional conduct, and may include, but not be limited to individuals and
13 institutions that identify themselves to consumers as "brokers," "deal-
14 ers," "investment advisors," "financial advisors," "financial planners,"
15 "financial consultants," "retirement planners," "retirement brokers,"
16 "retirement consultants," or by any other term that is suggestive of
17 investment, financial planning, or retirement planning knowledge or
18 expertise.
19 § 6-102. Required disclosure. 1. Non-fiduciary investment advisors
20 shall make a plain language disclosure to potential clients orally and
21 in writing prior to entering into any contract with such potential
22 client that ensures the potential client is aware that the fiduciary
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD05253-01-1
A. 1026 2
1 standard does not apply to the non-fiduciary investment advisor. Such
2 required disclosure shall state the following: "A non-fiduciary invest-
3 ment advisor is not required by law to act solely in the client's best
4 interest. Federal law, state law, and standards of professional conduct
5 do not apply a fiduciary standard to my investment recommendations,
6 although other standards may apply. You may ask any advisor to explain
7 to you the standards that apply to their investment recommendations."
8 The non-fiduciary investment advisor shall provide a copy of the disclo-
9 sure form to their client.
10 2. A written client agreement must include a separately signed
11 acknowledgement by the client that this plain language disclosure was
12 provided. The non-fiduciary investment advisor shall maintain the signed
13 acknowledgement alongside the written client agreement.
14 3. Investment brochures, advertising materials, or other related
15 printed information provided to potential clients must also include such
16 disclosure set forth in a clear and conspicuous manner.
17 4. Investment advisors that are subject to a fiduciary standard under
18 state or federal law or regulation or applicable standards of profes-
19 sional conduct with respect to certain types of investment advice but
20 not others, must disclose in plain language in writing the extent to
21 which the fiduciary standard applies in the context of each client
22 relationship.
23 § 6-103. Enforcement. Whenever the attorney general finds that there
24 has been a violation of this article, he or she may proceed as provided
25 in subdivision twelve of section sixty-three of the executive law. Civil
26 penalties up to five thousand dollars may be imposed for each violation
27 of this article.
28 § 2. This act shall take effect on the first of January next succeed-
29 ing the date on which it shall have become a law.
