Whether federal Regulation Best Interest preempts a state law imposing a fiduciary duty standard on broker-dealers that directly conflicts with the SEC's regulatory objectives

No question identified. : requires broker-dealers to “[a]ct in the best interest” of retail customers when recommending securities. 84 Fed. Reg. 33,318, 33,319 (July 12, 2019). Invoking the agency’s “important goal[]” of preserving “investor access” to diverse investment products and services, the SEC rejected, over the contrary position of various interests, including the Secretary of the Commonwealth of Massachusetts, imposing fiduciary duties on broker-dealers when they recommend securities. Id. at 33,323. Nine days later, the Secretary announced that Massachusetts would impose the very obligations that the SEC expressly rejected. Dismissing hundreds of comments warning that investors would lose access to valuable financial advice and products, he quickly promulgated a rule that treats “failing to act in accordance with” a fiduciary duty as a “dishonest and unethical practice[]” under the Massachusetts Uniform Securities Act. See 950 Code Mass. Regs. § 12.204(1)(a). He later touted the rule as the only fiduciary duty rule for broker-dealers in the Nation. 2. Roughly nine months after the rule took effect, Secretary Galvin filed an administrative complaint against applicant Robinhood Financial LLC. The complaint alleged that Robinhood engaged in “dishonest and unethical” conduct in violation of his new Fiduciary Duty Rule by publishing lists of investment categories like “100 Most Popular” or “Pharma,” and by implementing “strategies to encourage and incentivize” customer engagement. Robinhood sued in Massachusetts Superior Court, seeking a declaration that the Massachusetts rule violates state law and is preempted by Regulation Best Interest. The Superior Court ruled for Robinhood on state-law grounds, finding that “the Secretary’s promulgation of the Fiduciary Duty Rule was beyond his authority.” Robinhood Fin. LLC v. Galvin, 2022 WL 1720181, at *2 (Mass. Super. Mar. 30, 2022). The court did not reach Robinhood’s federal-law argument that Regulation Best Interest preempts the Massachusetts rule because the state rule stands as an obstacle to the full purposes and objectives of Regulation Best Interest. 3. The SJC reversed. Regarding preemption, the SJC conceded that the SEC rejected a fiduciary standard in order to preserve consumer choice and access. App.43a-44a. The court nonetheless dismissed the SEC’s goal as not a “significant regulatory objective.” App.44a-46a. The court did not address the fact that the SEC itself repeatedly called its choice-preserving goal “important,” and that this goal was the driving motivation for the SEC’s rejection of the standard that Secretary Galvin later adopted. See 84 Fed. Reg. at 33,322, 33,3238, 33,463, 33,491. The SJC also emphasized that the SEC was “aware of State laws imposing fiduciary obligations on broker-dealers and declined” to expressly preempt those laws. App.39a; see also App.40a; App.43-44a. But the SJC did not engage with Robinhood’s argument that, unlike with express preemption, conflict preemption does not require a “specific, formal agency statement identifying conflict.” Geter v. Am. Honda Motor Co., 529 U.S. 861, 884 (2000). In fact, the SEC did not disavow an intent to preempt; it simply acknowledged that the regulation’s preemptive force would have to be adjudicated on a case-by-case basis, depending on the content of the relevant state law. 84 Fed. Reg. at 33,327. This case presents the paradigmatic case for preemption: Massachusetts adopted the very standard the SEC rejected, for the express purpose of overriding the SEC’s policy choice. 4. Counsel respectfully requests a 60-day extension of time to file a petition for certiorari. This case presents significant and complex issues regarding the preemptive force of a major federal regulation that prompted thousands of comments. In addition, undersigned counsel has a number of other pending matters that will interfere with counsel’s ability to file the petition on November 24, 2023. In particular, counsel deliver