In a recent ruling, the Supreme Judicial Court of Massachusetts unanimously dismissed the objections raised by Robinhood Financial against the state secretary. The court found that the state secretary holds the authority to impose new fiduciary obligations on broker-dealers implicated in “unethical or dishonest conduct or practices”.
The case discussed whether the fiduciary duty rule, as implemented by Massachusetts’ securities regulator William Galvin, was an overreach of the secretary’s authority under the Massachusetts Uniform Securities Act (MUSA). However, Justice Dalila Argaez Wendlandt, representing the unanimous opinion of the court, concluded that it was not.
The court also declared that the fiduciary duty rule does not cancel out the investors’ pre-existing common-law protections and is not an improper delegation of legislative power. More so, they determined that the Securities and Exchange Commission’s (SEC) “best interest” national standard of care for broker-dealers (regulation 17 C.F.R. § 240.151-1, 2019), does not preempt the rule. According to this regulation, a broker-dealer or their agency would take up certain fiduciary duties, especially when offering recommendations and advice to retail investors.