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Regulation and Compliance > Federal Regulation > SEC

SEC Asks For More Comments About Fee-Based Advisors

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The U.S. Securities and Exchange Commission is asking for more advice about how it should treat brokers who get asset-based fees rather than traditional commissions.[@@]

The SEC proposed regulatory changes that would address the issue back in November 1999.

Originally, the SEC set a Jan. 14, 2000, deadline for comment submissions, but the SEC continues to get dozens of comments about the topic per month, and now SEC officials want to give more members of the public an official chance to comment on the proposed regulation, according to a notice by Margaret McFarland, an SEC deputy secretary, that appears today in the Federal Register.

McFarland points out that the Financial Planning Association, Denver, has raised new issues about the proposed regulatory changes in a recent letter and has filed a petition for judicial review of the proposal.

“In view of the significant continuing public interest in the proposal and in order to provide all persons who are interested in this matter a current opportunity to comment, we believe that it is appropriate to reopen the comment period before we take action on the proposal,” McFarland writes.

McFarland poses a list of questions for commenters:

- Do current fee-based programs more closely align the interests of investors with those of brokerage firms and their registered representatives than do traditional commission-based services?

- If the SEC decides not to adopt the rule proposed in 1999 as proposed, what would be the practical impact on broker-dealers?

- Should the SEC require broker-dealers who would seek to rely on the rule nevertheless to register if they market fee-based accounts based on the quality of investment advice provided?

McFarland also asks whether the SEC should prohibit brokers from using terms such as ??investment advice” and ??financial planning” in advertising these services or if prominent disclosure that an account was a brokerage account would be sufficient to alert an investor about the nature of the account?

The SEC notice is on the Web at //


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