Not content to wait for a ruling from a federal appeals court in its challenge to the “Merrill Lynch rule,” the FPA has opened up a new front by formally petitioning the SEC for clarification on the matter. In a formal letter to the commission, FPA has asked for regulatory guidance in understanding the differences between financial planning and fee-based brokerage services under the “Merrill Lynch rule” exemption that broker/dealers have from the Investment Advisers Act of 1940.
FPA notes that the rule has been in effect for more than a year, but that there are continuing problems regarding the interpretation of the financial planning restriction on brokerage firms. The FPA cites an investigative article in Smart Money (April 2007) that documents numerous violations of the rule.
“Regardless of whether FPA prevails in its legal challenge to this rule, there is a cloud of confusion surrounding its reach and implementation,” said Nicholas Nicolette, FPA’s president, in a statement released by the organization. “The SEC will ultimately need to clarify for investors and brokerage firms what financial planning services can and cannot be provided by brokerage firms, no matter what the services are called.”
In its letter to the SEC, FPA asks for clarification in three specific problem areas: