Bill Text: NY A02476 | 2019-2020 | General Assembly | Amended

Bill Title: 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.

Spectrum: Partisan Bill (Democrat 17-0)

Status: (Introduced) 2019-05-23 - print number 2476a [A02476 Detail]

Download: New_York-2019-A02476-Amended.html

                STATE OF NEW YORK


                               2019-2020 Regular Sessions

                   IN ASSEMBLY

                                    January 22, 2019

        Introduced  by  M.  of  A.  DINOWITZ, GOTTFRIED, ORTIZ, STECK, PICHARDO,
          Multi-Sponsored  by  -- M. of A. DAVILA, GLICK, SIMON -- read once and
          referred to the Committee on Judiciary -- reported and referred to the
          Committee on Codes --  committee  discharged,  bill  amended,  ordered
          reprinted as amended and recommitted to said committee

        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

         EXPLANATION--Matter in italics (underscored) is new; matter in brackets
                              [ ] is old law to be omitted.

        A. 2476--A                          2

     1  in writing prior to entering  into  any  contract  with  such  potential
     2  client  that  ensures  the  potential client is aware that the fiduciary
     3  standard does not apply to the non-fiduciary  investment  advisor.  Such
     4  required  disclosure shall state the following: "A non-fiduciary invest-
     5  ment advisor is not required by law to act solely in the  client's  best
     6  interest.  Federal law, state law, and standards of professional conduct
     7  do not apply a fiduciary  standard  to  my  investment  recommendations,
     8  although  other  standards may apply. You may ask any advisor to explain
     9  to you the standards that apply to  their  investment  recommendations."
    10  The non-fiduciary investment advisor shall provide a copy of the disclo-
    11  sure form to their client.
    12    2.  A  written  client  agreement  must  include  a  separately signed
    13  acknowledgement by the client that this plain  language  disclosure  was
    14  provided. The non-fiduciary investment advisor shall maintain the signed
    15  acknowledgement alongside the written client agreement.
    16    3.  Investment  brochures,  advertising  materials,  or  other related
    17  printed information provided to potential clients must also include such
    18  disclosure set forth in a clear and conspicuous manner.
    19    4. Investment advisors that are subject to a fiduciary standard  under
    20  state  or  federal  law or regulation or applicable standards of profes-
    21  sional conduct with respect to certain types of  investment  advice  but
    22  not  others,  must  disclose  in plain language in writing the extent to
    23  which the fiduciary standard applies  in  the  context  of  each  client
    24  relationship.
    25    §  6-103.  Enforcement. Whenever the attorney general finds that there
    26  has been a violation of this article, he or she may proceed as  provided
    27  in subdivision twelve of section sixty-three of the executive law. Civil
    28  penalties  up to five thousand dollars may be imposed for each violation
    29  of this article.
    30    § 2. This act shall take effect on the first of January next  succeed-
    31  ing the date on which it shall have become a law.