The U.S. District Court for the Western District of Missouri on August 14, 2024 struck down rules promulgated by Missouri Secretary of State Jay Ashcroft and written by Missouri Commissioner of Securities Douglas Jacoby that required securities firms and professionals to obtain a signature from Missouri investors on consent forms before incorporating a “social objective” or other “nonfinancial objective” into their securities recommendations or investment advice. The written consent form included an express acknowledgement that said securities recommendations or investment advice would result in investments and recommendations that are not solely focused on maximizing a financial return to the investor, which was politically motivated by Ashcroft’s run for Missouri governor, as he stated:
“I also oversee the state’s securities industry and instituted new rules requiring Wall Street money managers notify their customers when they use woke ESG strategies for investing their retirement savings, rather than the best return for their investors. Bureaucrats, bankers, and lobbyists shouldn’t be making our decisions for us.[1]
The Securities Industry and Financial Markets Association (“SIFMA”) sued Ashcroft and Jacoby to block these rules captioned “Dishonest or Unethical Business Practices by Broker-dealers and Agents” and “Dishonest or Unethical Business Practices by Investment Advisers and Investment Adviser Representatives,” alleging that the rules were expressly preempted by the National Securities Markets Improvement Act of 1996 (“NSMIA”), the rules were preempted by ERISA, the rules were preempted by the First Amendment because they were not purely factual but were opinion and misleading, and the rules were unconstitutionally vague because they fail to adequately define “consider” and “nonfinancial objective.”
Finding that SIMFA had shown actual success on the merits, irreparable harm, the balance of harms weighed in favor of a permanent injunction, and a permanent injunction was in the public interest, the federal district court struck down the rules. In a further rebuke, the court held that SIFMA was entitled to a declaratory judgment that the rules are preempted by NSMIA and ERISA, are unconstitutional under the First and Fourteenth Amendments of the United States Constitution and are impermissibly vague under the Fourteenth Amendment of the United States.
If the Missouri Commissioner of Securities attempts to enforce these or any other rules pursuant to which it alleges jurisdiction against you, you may not want to act alone and wish to consult with one of the experienced attorneys at Cosgrove Law Group, LLC. Call us at 314-563-2490.
[1] https://ashcroftformissouri.com/