Washington's Department of Financial Institutions proposed amendments mandating errors-and-omissions insurance for state-registered investment advisors. The rule would require advisors to carry at least $1 million in coverage. Oregon and Oklahoma are currently the only two states with similar mandates. The public comment period closed on August 25, with a public hearing held the following day.

The amendments would also adopt the SEC's Marketing Rule and introduce a continuing education requirement for state-registered advisors. The proposal would update the definition of qualified client to mirror federal definitions. If adopted as proposed, advisors in Washington state would have until January 1, 2027, to attain compliant E&O insurance.

Joseph Wojcieschowski, an attorney with Chicago-based Stoltman Law Offices and incoming president of the Public Investors Advocate Bar Association, submitted a letter to the DFI supporting the rule changes. Wojcieschowski claimed there was no evidence that requiring advisors to carry E&O insurance impacts consumers' access to investment advice. The rule could help reduce unpaid awards, which he argued "continue to plague the financial services industry and harm investors in every state," he said.

PIABA has long tracked rates of unpaid awards in the space, arguing that investors too often do not see the money from favorable arbitration decisions. Those decisions are often issued after companies are defunct. "If I were entrusting my money to a professional to invest it at his discretion, as a fiduciary RIA does, then I would certainly hope that person has insurance to cover losses in the event of his negligence," Wojcieschowski said. "At a minimum."

Wojcieschowski said PIABA is trying to find more states to sign on to E&O rules, particularly seeking those with larger populations "that would really move the needle." He said the best solution would be at the federal level, with a uniform standard through legislation or Securities and Exchange Commission rulemaking. He acknowledged that such rulemaking under the current regulatory regime was unlikely.

The North American Securities Administrators Association released model rules in 2021 that mirror some of the potential changes in Washington state, including labeling non-payment as an antithetical business practice. At the time, NASAA questioned whether E&O insurance could adequately protect clients, as it may be too expensive for smaller firms. The insurance often excluded high-risk alternative products and instances of fraud from coverage. A 2019 survey by the association found that about 77 percent of broker-dealer respondents had such insurance.

Schwab and Fidelity have instilled rules requiring RIAs using their custodial services to carry some insurance, including E&O coverage. A 2025 article from the University of Michigan Business and Entrepreneurial Law Review found that Schwab RIAs could have moved to a different platform after the custodian's insurance mandate. There was no indication the rule affected Schwab's market share. The authors acknowledged that despite Schwab's and Fidelity's moves, private insurance requirements "have not yet proliferated and changed broader industry practices." The majority of custodial platforms do not have similar mandates. The DFI is reviewing public comments and anticipates making a decision on whether to adopt final rules within the next two months.