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
________________________________________________________________________
2464--A
2017-2018 Regular Sessions
IN ASSEMBLY
January 20, 2017
___________
Introduced by M. of A. DINOWITZ, GOTTFRIED, ORTIZ, STECK, PICHARDO,
MOSLEY, BLAKE, SEAWRIGHT, BICHOTTE, COOK, COLTON, GALEF, BUCHWALD --
Multi-Sponsored by -- M. of A. DAVILA, GLICK, SIMON, TITONE -- read
once and referred to the Committee on Judiciary -- reported and
referred to the Committee on Codes -- recommitted to the Committee on
Codes in accordance with Assembly Rule 3, sec. 2 -- 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 investment advisors currently not subject to a fiduciary standard under
10 existing state and federal laws or regulations or by any applicable
11 standards of professional conduct. "Non-fiduciary investment advisors"
12 shall include, but not be limited to individuals and institutions that
13 identify themselves to consumers as "brokers," "dealers," "investment
14 advisors," "financial advisors," "financial planners," "financial
15 consultants," "retirement planners," "retirement brokers," "retirement
16 consultants," or by any other term that is suggestive of investment,
17 financial planning, or retirement planning knowledge or expertise.
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD03774-02-8
A. 2464--A 2
1 § 6-102. Required disclosure. 1. Non-fiduciary investment advisors
2 shall make a plain language disclosure to clients orally and in writing
3 at the outset of the relationship that ensures that individual investors
4 are aware of potential conflicts of interest. Such required disclosure
5 shall state the following: "I am not a fiduciary. Therefore, I am not
6 required to act in your best interests, and am allowed to recommend
7 investments that may earn higher fees for me or my firm, even if those
8 investments may not have the best combination of fees, risks, and
9 expected returns for you." The non-fiduciary investment advisor shall
10 provide a copy of the disclosure form to their client.
11 2. A signed acknowledgement by the client that this plain language
12 disclosure was provided must be maintained by the non-fiduciary invest-
13 ment advisor alongside any written client agreement.
14 3. Any investment brochures, advertising materials, or other related
15 printed information provided to clients, or any subsequent oral invest-
16 ment advice to them, must also include such disclosure set forth in a
17 clear and conspicuous manner. The non-fiduciary investment advisor shall
18 provide a copy of the disclosure form to their client.
19 4. Investment advisors that are subject to the fiduciary duty under
20 law or applicable standards of professional conduct with respect to
21 certain types of investment advice but not others, must disclose in
22 plain language the extent to which the fiduciary duty does and does not
23 apply.
24 § 6-103. Enforcement. Whenever the attorney general finds that there
25 has been a violation of this article, he or she may proceed as provided
26 in subdivision twelve of section sixty-three of the executive law. Civil
27 penalties up to five thousand dollars may be imposed for each violation
28 of this article.
29 § 2. This act shall take effect on the first of January next succeed-
30 ing the date on which it shall have become a law.
