The Securities and Exchange Commission has decided not to appeal the March 30 ruling by the U.S. Court of Appeals for the D.C. Circuit, which exempted brokers from being subject to regulation as investment advisors in fee-based brokerage accounts, on the basis that the SEC had exceeded its authority under the Investment Advisers Act of 1940. The SEC instead announced May 14 that it will ask a court to allow a 120-day stay of the Appeals court’s ruling so that investors and their brokers could respond. The Commission estimates that one million fee-based brokerage accounts are affected by the ruling.

The Financial Planning Association, which filed the suit that successfully challenged the broker/dealer exemption rule, also known as the Merrill Lynch rule, had earlier estimated that about $300 billion was residing in those B/D fee-based brokerage accounts.

The SEC said it will consider whether further rulemaking or interpretations are necessary regarding the application of the Advisers Act to these accounts and the issues resulting from the court’s decision.

In its statement announcing its decision to forego an appeal, the Commission said that Chairman Christopher Cox has also approved “additional emergency funding to accelerate” the Rand Corp. study of how consumers are served by the brokerage and advisory industry. That additional funding will allow the study to be delivered to the Commission by December 2007, months ahead of schedule.