With the recent announcement by the Securities and Exchange Commission (SEC) that it will hold an open meeting on June 5, 2019, to consider adopting Regulation Best Interest, one of the major issues that the SEC may clarify is its view of whether Regulation Best Interest preempts state securities regulations that impose a fiduciary duty on broker-dealers.

The North American Securities Administrators Association, Inc. (NASAA), recently submitted a supplemental comment letter to the SEC regarding the preemption of state securities regulations by Regulation Best Interest. In its letter, NASAA argues that Regulation Best Interest does not preempt state securities regulations imposing a separate standard of conduct on broker-dealers, because such preemption was not contemplated by the National Securities Market Improvement Act of 1996 (NSMIA). The broker-dealer community has pushed back, urging the SEC to weigh in and indicate that Regulation Best Interest is intended to preempt these state securities initiatives.