N.J. Governor Vetoes Bill Saying Insurance Agents Are Not Fiduciaries

Governor Phil Murphy announced on May 13, 2019 that he was sending Senate Bill No. 2475 back for reconsideration, with several recommended changes. A recently proposed rule by the state’s Bureau of Securities would require all financial advisors registered in the state to act as fiduciaries, making New Jersey one of the first states to propose a uniform fiduciary standard for all financial services professionals.

He recommended the legislature remove section 1 of the bill, which “prohibits a cause of action against an insurance producer arising from transactions involving property and casualty insurance or a health benefits plan where the cause of action is based on a fiduciary duty.” He believes that will also leave it open for lawmakers to impose a fiduciary duty on insurance producers.

He also suggests the removal of the third section of the bill, which would require the insurance agent to notify clients that information about their compensation is available, rather than disclose that information to the client directly. And they’d have to include only information about compensation that’s based on a percentage of the premium.

The rule would apply to recommendations on investments; opening or transferring assets into any kind of account; and the purchase, sale or exchange of any security. A broker or advisor has to make “reasonable inquiry” in the best interest of their client, and any recommendations offered cannot be made with regard to a financial interest of the broker, advisor or any other third party.

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