S T A T E O F N E W Y O R K
________________________________________________________________________
1026
2021-2022 Regular Sessions
I N A S S E M B L Y
January 7, 2021
___________
Introduced by M. of A. DINOWITZ, GOTTFRIED, STECK, PICHARDO, SEAWRIGHT,
BICHOTTE, COOK, COLTON, GALEF, THIELE -- Multi-Sponsored by -- M. of
A. DAVILA, GLICK, SIMON -- read once and referred to the Committee on
Judiciary
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:
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 PROFES-
SIONAL CONDUCT, AND MAY INCLUDE, BUT NOT BE LIMITED TO INDIVIDUALS AND
INSTITUTIONS THAT IDENTIFY THEMSELVES TO CONSUMERS AS "BROKERS," "DEAL-
ERS," "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.
LBD05253-01-1
A. 1026 2
STANDARD DOES NOT APPLY TO THE NON-FIDUCIARY INVESTMENT ADVISOR. SUCH
REQUIRED DISCLOSURE SHALL STATE THE FOLLOWING: "A NON-FIDUCIARY INVEST-
MENT 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 DISCLO-
SURE 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 PROFES-
SIONAL 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 succeed-
ing the date on which it shall have become a law.