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Regulation and Compliance > Federal Regulation > SEC

New SRO May Become a Reality by Second Quarter

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The merger of the regulatory arms of the NYSE and NASD will hopefully be completed by the second quarter of this year, Robert Errico, executive VP at NASD told a group of lawyers at ALI-ABA’s broker/dealer regulation event in Washington January 11. Errico said the new SRO will yield a “synergy that should have happened a long time ago,” stating that the voting for changes in the bylaws has yet to be completed and that the proxies should be counted in a matter of weeks.

Meanwhile, Mary Ann Gadziala, associate director of the SEC Office of Compliance Inspections and Examinations (OCIE), told attendees that the regulator’s study of broker and advisor regulation is underway, and that while a deadline for completing the study has never been formally stated, the SEC expects it to take about 18 months.

Andre Owens, a lawyer with Wilmer Cutler Pickering Hale and Dorr in Washington, who sat on a panel with Gadziala, said that he still devotes a lot of time trying to help clients define what financial planning means in the SEC’s broker/dealer exemption rule, also known as the Merrill rule. Under the SEC’s rule, broker/dealers who provide non-discretionary advice that’s solely incidental to their brokerage services regardless of the form of compensation are exempt from registering as investment advisors. Owens asked Gadziala if the SEC planned to issue further guidance defining what constitutes financial planning. She responded that the industry must first ask the SEC for clarification. “We have to get the questions before we can provide interpretive guidance,” Gadziala said.


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