What's happening
This bill requires non-fiduciary investment advisors in New York to clearly disclose their non-fiduciary status and related standards to clients.
Why it matters
Increases consumer awareness. By mandating clear, plain-language disclosures from non-fiduciary investment advisors, the bill aims to help clients better understand the difference between fiduciary and non-fiduciary standards—potentially preventing misunderstandings about whose interests are being prioritized.
Standardizes disclosure practices. The bill creates consistent rules requiring advisors to disclose their non-fiduciary status orally, in writing, and in all advertising materials, ensuring clients receive the same information regardless of how they interact with the advisor.
Requires client acknowledgment. Clients must sign an acknowledgment that they received the disclosure, and advisors must retain this documentation—creating a paper trail that can help resolve disputes and ensure compliance.
Enforces compliance with penalties. The Attorney General is empowered to enforce the law, including issuing civil penalties of up to $5,000 per violation, adding real consequences for non-compliance and incentivizing transparency in the industry.
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Who cares
Headline styles
Require Investment Advisor Disclosures
Plain English, a few words. Used as the page title.
Sponsors
No co-sponsors yet.
History
- Referred to judiciary
- Print number 2872a
- Amend and recommit to judiciary
- Referred to judiciary
Companion bill
The same bill in the other chamber. A bill becomes law when one version passes both houses and the governor signs it, so either number can carry it.
Disclose Investment Advisor Status
In Assembly Committee · Codes · Sponsor Jeffrey Dinowitz
Full text
2 pagesUnderlined is new[Struck] is removedOfficial text on nysenate.gov ↗
STATE OF NEW YORK
2872--A
2019-2020 Regular Sessions
IN SENATE
January 30, 2019
Introduced by Sen. HOYLMAN -- read twice and ordered printed, and when printed to be committed to the Committee on Judiciary -- 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 investment advice
The People of the State of New York, represented in Senate and Assembly, do enact as follows:
Section 1. The general obligations law is amended by adding a new article 6 to read as follows:
ARTICLE 6
INVESTMENT TRANSPARENCY ACT Section 6-101. Application.
6-102. Required disclosure.
6-103. Enforcement.
§ 6-101. Application. The provisions of this article are applicable to non-fiduciary investment advisors. Non-fiduciary investment advisors are investment advisors not subject to a fiduciary standard under state or federal laws or regulations or by any applicable standards of professional conduct, and may include, but not be limited to individuals and institutions that identify themselves to consumers as "brokers," "dealers," "investment advisors," "financial advisors," "financial planners," "financial consultants," "retirement planners," "retirement brokers," "retirement consultants," or by any other term that is suggestive of investment, financial planning, or retirement planning knowledge or expertise.
§ 6-102. Required disclosure. 1. Non-fiduciary investment advisors shall make a plain language disclosure to potential clients orally and in writing prior to entering into any contract with such potential 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.
LBD00750-04-9
S. 2872--A 2
standard does not apply to the non-fiduciary investment advisor. Such required disclosure shall state the following: "A non-fiduciary investment advisor is not required by law to act solely in the client's best interest. Federal law, state law, and standards of professional conduct do not apply a fiduciary standard to my investment recommendations, although other standards may apply. You may ask any advisor to explain to you the standards that apply to their investment recommendations." The non-fiduciary investment advisor shall provide a copy of the disclosure form to their client.
2. A written client agreement must include a separately signed acknowledgement by the client that this plain language disclosure was provided. The non-fiduciary investment advisor shall maintain the signed acknowledgement alongside the written client agreement.
3. Investment brochures, advertising materials, or other related printed information provided to potential clients must also include such disclosure set forth in a clear and conspicuous manner.
4. Investment advisors that are subject to a fiduciary standard under state or federal law or regulation or applicable standards of professional conduct with respect to certain types of investment advice but not others, must disclose in plain language in writing the extent to which the fiduciary standard applies in the context of each client relationship.
§ 6-103. Enforcement. Whenever the attorney general finds that there has been a violation of this article, he or she may proceed as provided in subdivision twelve of section sixty-three of the executive law. Civil penalties up to five thousand dollars may be imposed for each violation of this article.
§ 2. This act shall take effect on the first of January next succeeding the date on which it shall have become a law.
Reflowed for reading: line numbers and page breaks removed. Cite the official text.
Sponsor's memo
Title of bill
An act to amend the general obligations law, in relation to mandating greater levels of disclosure by non-fiduciaries that provide investment advice
Purpose
The Investment Transparency Act (ITA) mandates new disclosures by insti- tutions and individuals that provide investment advice, but who are not required by law, professional standards, or their own policy to follow a fiduciary standard of acting in their clients' best interests ("non-fi- duciary investment advisors").
Summary of provisions
Section 1 amends the general obligations law by adding a new article 6.
Read the full memo (826 words)
Section 6-101 determines that investment advisors currently not subject to a fiduciary standard under existing state and federal laws or regu- lations or by any applicable standards of professional conduct would be subject to this bill. This includes those non-fiduciary investment advi- sors who identify themselves to consumers as "brokers," "dealers," "investment advisors," "financial advisors," "financial planners," "financial consultants," "retirement planners," "retirement brokers," "retirement consultants," or by any other term that is suggestive of investment, financial planning, 'ox retirement planning knowledge or expertise.
Section 6-102 requires non-fiduciary investment advisors to make a plain language disclosure to clients orally and in writing - at the outset of the relationship that ensures that individual investors are aware of potential conflict of interest. The disclosure shall read: "A non-fidu- ciary investment advisor is not required by law to act solely in the client's best interest. Federal law, state law, and standards of profes- sional conduct do not apply a fiduciary standard to my investment recom- mendations, although other standards may apply. You may ask any advisor to explain to you the standards that apply to their investment recommen- dations."
Section 6-103 provides for the enforcement of the act, including penal- ties.
Section 2 establishes the effective date.
Justification
The Investment Transparency Act is based on a report conducted by New York City Comptroller Scott M. Stringer. Many New Yorkers hire financial professionals to manage their retirement or other investments, but have difficulty understanding the distinctions between the titles used by such professionals, their duties, the services they offer, and the fees they pay for those services. Most importantly, many individual investors are do not know whether the financial professional they have hired is required to act in their best interest (the "fiduciary standard").
Financial professionals who adhere to a fiduciary standard are obligated to avoid conflicts of interest and fully disclose and manage, in the client's favor, any conflicts. Consistent with this obligation, fiduci- aries are required to provide prudent and objective analysis and advice, including offering the client low-fee and low-commission investment options.
However, existing laws, regulations, and professional standards at the federal and state level only hold certain financial professionals to a fiduciary standard, including Registered Investment Advisors (RIAs) that are registered with the Securities and Exchange Commission (SEC) or a state securities regular; retirement plan managers acting as fiduciaries under the Employee Retirement Income Security Act (ERISA); Certified Financial Planners (CFPs); Chartered Financial Analysts (CFAs); and Certified Public Accountants (CPAs).
Other financial professionals, such as broker-dealers, follow a differ- ent norm known as the suitability standard. The suitability standard only requires that brokers guide their clients towards investments "suitable" to the clients' stated investment objectives, means, and age. So as long as an investment conforms to those broad guidelines, the broker is under no legal obligation to choose the in vestment option that promises the highest potential return for the lowest possible fee. As a result, financial professionals that do not abide by the fiduciary standard may encourage investments that carry higher transaction fees, or direct investors' money into less advantageous "in house" invest- ments.
Simply put, a suitability standard allows brokers to put their own interest, or their firms' interest, before the customer's bottom line.
High fees, limited transparency, unacknowledged risks, and outright conflicts of interest cost U.S. investors an estimated $8 to $17 billion per year in retirement savings. This means that a conscientious retire- ment saver who expects to retire in 30 years will lose at least 5 to 10 percent of retirement savings due to fees and underperformance compared to more passively indexed funds, or the equivalent of approximately one to three years' worth of withdrawals during retirement.
While individuals should be able to choose whatever investments suit their particular needs - including, potentially, higher fee investments - those decisions should only be made with all available information, including whether and to what extent their broker will benefit form a particular investment choice.
This bill is designed to provide greater transparency to New York State consumers so that they are empowered to make more informed choices when selected financial professionals and choosing investment vehicles.
Legislative history
2017-18: A.2464 (Dinowitz) - Third Reading Calendar 2015-16: A.6933 (Dinowitz) - Referred to Judiciary
Fiscal implications
None to the State.
Effective date
This act shall take effect on the first of January next succeeding the date on which it shall have become law.
Summaries, headlines and scores are AI-generated from the official bill text. How we score bills. Source: NYS Open Legislation.