The U.S. Securities and Exchange Commission says it will drop a court battle to exempt broker-dealers who collect fees as well as commissions from the fiduciary requirements of the Investment Advisers Act of 1940.

But the SEC says it will ask the U.S. Court of Appeals for the District of Columbia to allow 4 months for investors and brokers to respond.

The decision to impose Investment Advisers Act fiduciary requirements on broker-dealers that collect fees will affect about 1 million fee-based brokerage accounts and about $300 billion in customer assets, SEC officials estimate.

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.

In March, a 3-judge appeals court panel ruled 2-1 that the SEC lacks the authority to exempt broker-dealers from the fiduciary requirements.

The SEC “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,” SEC officials say in an announcement of their decision not to appeal the court’s fiduciary requirements ruling.

The SEC also will work with individual brokerage firms to help them respond, and it will accelerate the delivery of a previously commissioned study that will look at ways to improve U.S. securities laws and regulations, officials say.

The Financial Planning Association, Denver, a group representing many fee-based investment advisors who have been operating under IAA fiduciary requirements all along, was the group that challenged the SEC’s efforts to exempt broker-dealers from the requirements.

The FPA has welcomed the SEC’s decision not to prolong the legal battle.

The FPA will study the SEC’s motion before deciding whether to support it, according to Duane Thompson, managing director of the FPA’s Washington office.

The court should avoid creating an open-ended transition period, but the FPA agrees with the idea that the court should provide a reasonable deadline for transitioning fee-based accounts to IAA jurisdiction, Thompson says.