States are stepping up efforts to regulate Wall Street while Washington focuses its energies elsewhere.
On Tuesday, Massachusetts' William Galvin, secretary of the commonwealth and that state's securities regulator, announced an investigation into how top U.S. brokerages handle customer buy and sell orders to see whether fees the exchanges pay brokerages for those orders prevent customers from getting the best price for their trades.
The investigation, which is looking at seven big retail brokerages, comes as the Securities and Exchange Commission is still considering starting a long-delayed test program that would study the effect of those payments, which the industry calls rebates, and their effect on the way the stock markets operate.
Last month SEC Chairman Jay Clayton said in a speech that the agency will consider a formal proposal to initiate the test program later this year.
But Galvin told CNBC on Tuesday that he was acting now because of "emerging evidence that this administration is not going to do anything to regulate this industry," citing efforts in a Republican-controlled Congress and White House to roll back financial reform. "It's obvious it's not going to be at the top of their list."
Regulators and lawmakers in several states apparently share the same view. Mike Rothman, president of the North American Securities Administrators Association and Minnesota's commissioner of Commerce, said in a statement to CNBC: "State securities regulators have worked hard to protect investors in small towns and large cities across America and provide a regulatory framework for responsible capital formation. Our strong tradition of protecting Main Street investors serves an important role in helping to maintain overall confidence in our nation's financial markets."
In July, Nevada put brokers working in the state under a fiduciary standard that they must give advice in a client's interest, and the state's securities regulator is now working on the details of that rule.
Nevada's Republican governor signed the bill in June, even as the complete implementation of an Obama-era federal fiduciary rule by the Department of Labor was delayed pending a review and possible repeal by the Trump administration. Part of that federal fiduciary standard did go into effect in June.
Other states are said to be considering their own broker fiduciary standards, including Connecticut, New Jersey and New York, said George Michael Gerstein, counsel at Stradley Ronon Stevens & Young.
"We know that other states are looking at this closely," he said. "The states' possible response to what the SEC or DOL does appears to be part of a larger trend of state action in other policy areas. The state fiduciary laws may depend on the outcome of the DOL fiduciary rule, which makes this a dynamic situation."
In June California's state senate called on the U.S. Senate to reject legislation that tries to roll back consumer protections in the 2010 Dodd-Frank financial reforms.
Maryland Securities Commissioner Melanie Senter Lubin told Congress in April that it needs to remember the lessons of the 2008 financial crisis as it considers new legislation that will, she warned, weaken oversight of private securities markets, reverse investor protections and dilute rules that keep bad actors out of securities markets.
Galvin, a Boston native who has held public office as a Democrat since 1975, told CNBC the "lack of enthusiasm" in Washington to keep a close eye on Wall Street means "the states will lead the way."