SEC Under Fire Over Implied Rule | AccountingWEB

SEC Under Fire Over Implied Rule

Financial planners are crying foul and asking the Securities and Exchange Commission to crack down on brokers who offer fee-based accounts and investment advisory services without having to follow the same strict rules required of financial planners, Dow Jones reported.

The SEC has received more than 900 letters from financial planners urging resolution of an issue that has been around for years.

"These brokers are trying to provide essentially the same services that I provide as a financial planner," wrote Charles O'Connor, who runs a Torrance, Calif., advisory firm, and reported by Dow Jones. "Why should it be mandated that they do not need to meet the minimum requirements that the SEC says a real investment advisor is required to meet?"


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The SEC ended its comment period yesterday on a controversial 1999 proposal that allows brokers to offer advisory services and fee-based accounts with out being required to follow the tougher investment-advisor rules, Dow Jones reported.

The rule has been known as the “Merrill Lynch rule,” because it was published as the brokerage firm was introducing fee-based accounts. The SEC never formally adopted the proposal but allowed brokers to do business as if it were in effect, Dow Jones reported, until financial planners challenged the lack of an official rule in a lawsuit this summer. The suit claims the SEC violated administrative procedures by allowing the rule to go into effect without taking a formal vote on it.

The Financial Planning Association has asked for a stay of its lawsuit while the SEC revisits the proposal, Dow Jones reported, adding that the commission has vowed to act by the end of the year.

"If they adopt it as proposed, I think it is highly likely we would pursue the case in court," Duane Thompson, a spokesman for the Financial Planning Association who wrote to oppose the rule, told Dow Jones.

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