A Battle Won, not the War

It’s hard not to celebrate the Financial Planning Association’s big win over the SEC in a federal appellate court as an instance of David slaying Goliath. After all, the FPA had gone out on a jurisprudential limb in challenging the Commission over its broker/dealer exemption, more popularly known as the “Merrill Lynch” rule. (That’s more popular outside the SEC itself. Once when I used the “Merrill” phrase in a conversation with an SEC attorney, said attorney was oh so quick to correct me.)

Making the playing field more level for all the players, defining what the responsibilities are for people who provide advice to individuals, “bringing clarity to the financial services marketplace,” in the words of FPA Chair Dan Moisand, one of the prime movers behind the suit, that’s what this D.C. Circuit Court decision has made possible. In an interview just before the March 30 court decision, FPA President Nick Nicolette said that the suit–and the second draft of the CFP Board’s ethics code–constituted a move toward defining “one set of standards for everyone who provides advice.” As Bob Clark notes in his column this month, the FPA (and consumers in general) would have won even if it had lost the suit, “in the sense that it would have generated substantial publicity for the fact that stockbrokers are exempt from the duties and responsibilities of advisors, even when they are posing as advisors.” But it won, “reestablishing that brokers who charge a fee for advice have a fiduciary duty to their clients,” Clark notes.

Sure, the SEC could appeal the decision to the Supreme Court, or ask for a rehearing by the District Court, a move recommended by SIFMA, whose president, Marc Lackritz, positioned the issue as one of protecting consumers’ “options for receiving and paying for financial services.” But how likely is an appeal or a rehearing?