The Financial Planning Association has won a battle in court against the U.S. Securities and Exchange Commission.
A 3-judge panel of the U.S. Court of Appeals for the District of Columbia today ruled 2-1 that the SEC lacks the authority to exempt broker-dealers who collect fees as well as commissions from the fiduciary requirements of the Investment Advisers Act of 1940.
The SEC has been trying since 1999 to use a section of the act that permits it to exempt “any other persons not within the intent of this paragraph” from the IAA fiduciary requirements.
Judge Brett Kavanaugh and Judge Judith Rogers agreed with the FPA, Denver, that another part of the paragraph that refers to brokers and dealers who receive “special compensation” clearly prohibits the SEC from exempting broker-dealers with fee-based compensation arrangements from the IAA.
The third judge, Judge Merrick Garland, filed a dissent agreeing with the SEC that the “any other persons” provision appears to give the SEC the right to exempt broker-dealers.