NEW! Fiduciary Duty - SB 383

Updated September 8, 2017

**NEW! Notice of Workshop to Solicit Comments on Proposed Regulations and Agenda*

CLICK HERE TO VIEW NOTICE

Members of the public are encouraged to submit written comments for record at: fiduciaryduty@sos.nv.gov

Statutory Fiduciary Duty/Senate Bill 383

Effective July 1, 2017, Nevada law imposes a statutory fiduciary duty as set forth in Chapter 628A of the Nevada Revised Statutes on Broker-Dealers and Investment Advisers.  The law was adopted pursuant to Nevada Senate Bill 383 (“SB 383”) which can be found on the Nevada Legislature’s website.  The bill can be found by accessing the below link:

https://www.leg.state.nv.us/Session/79th2017/Bills/SB/SB383_EN.pdf   

SB 383 also authorizes the Administrator of the Nevada Securities Division, Office of the Secretary of State (“Division”), to adopt regulations relating to this fiduciary duty.  In order for the Division to adopt regulations as authorized by SB 383, the Division must adhere to Nevada’s Administrative Procedures Act as codified in NRS Chapter 233B. 

The Division is currently in the process of considering and drafting regulations for proposal as authorized by SB 383.  At this time, the Division intends to include regulations that will further define acts, practices, or a course of business that are a violation of the fiduciary duty imposed by NRS 628A.020.  The Division is also in the process of drafting regulations that will identify acts, practices, or a course of business that may be excluded as a violation of the fiduciary duty.   The regulatory authority granted also may allow the division to further define certain terms in Chapter 628A.  The regulation adoption process generally requires, among other things, that the Division determine the impact of the regulations on small businesses, to conduct at least one workshop on the proposed regulations, submit the proposed regulations to the Legislative Counsel Bureau (“LCB”) for review, and to conduct public hearings on the proposed regulations.  The Division’s tentative proposed timeline for the adoption of regulations as authorized by SB 383 is as follows:     

Impact on Small Business. 

The Division will determine if proposed regulations adopted pursuant to SB 383 are likely to impose a direct and significant economic burden upon small business or directly restrict the formation, operation or expansion of a small business.  This determination is focused on the impact of the regulations as opposed to the statutory language and duty originally imposed by SB 383.   A small business is defined as a business conducted for profit that employs fewer than 150 full-time or part-time employees.  If you believe your small business may be so affected by the Division’s adoption of regulations as generally described above, the Division invites written comments to be sent to the attention of the Administrator at fiduciaryduty@sos.nv.gov no later than August 15, 2017.  Please explain in your comment how you qualify as a small business by identifying the number of your employees.

Workshop

The Division anticipates conducting a workshop to formally solicit comments from interested persons regarding contemplated regulations during mid to late September.  The Division will provide written notice of the specific time and place at least 15 days in advance of that workshop.  The Division is currently considering if more than one workshop on the fiduciary duty law established by SB 383 would be beneficial.  The Division will also hold a separate workshop on regulations not related to the new fiduciary duty law, but related to other provisions of Chapter 90 of the Nevada Administrative Code.  Although not required by Nevada’s Administrative Procedures Act, the Division anticipates releasing a draft of at least a portion of the proposed regulations prior to the workshops so interested persons may provide specific comments and concerns.   

Although a workshop on the fiduciary duty law will be held, the Division is encouraging Broker-Dealers and Investment Advisers to provide written comment at any time prior to this workshop.  Such comment could include specific issues the licensee has experienced as a result of the enactment of SB 383, any specific terms or language in NRS Chapter 628A that a licensee believes may benefit from definition or clarification, and any comments on the current Department of Labor’s Fiduciary Duty rule or current case law which established a fiduciary duty on Broker-Dealers in certain cases.  These suggestions are not exclusive.

Submission for LCB Review

The Division anticipates submitting proposed regulations to the Nevada Legislative Counsel Bureau (“LCB”) for review no later than November 2017.  The LCB has 30 days to review and make any revisions to the Division’s proposed regulations.

Public Hearings. 

Subsequent to the initial review by LCB, the Division will conduct an oral public hearing after providing no less than 30 days’ written notice of its intent to adopt the proposed regulations.  Alternatively, interested persons may submit their views in writing.  The Division anticipates conducting the required public hearing after January 1, 2018.   If there are any revisions to the proposed regulations after the public hearing, the Division is required to submit them to the LCB for review again.  As indicated above, the Division anticipates releasing a draft of the proposed regulations prior to the workshop.  Therefore, the Division anticipates receiving many comments and suggestions from interested persons prior to initial submission to the LCB.                          

The Division encourages you to check this web page frequently for updated information.