Now that the Broker/Dealer Exemption Rule 202(a)(11)-1 which exempted brokers from regulation as an investment advisor even when they were being paid fees for investment advice in fee-based brokerage accounts, has been vacated by the U.S. Court of Appeals for the D.C. Circuit, how will it affect compliance for independent B/Ds?
In order for a B/D to protect itself, it may come down to how that firm treats its individual investor clients even more than the paperwork necessary to change fee-based brokerage accounts to either investment advisory or commission-based brokerage accounts, though some B/Ds say that may be daunting. Clients will have to choose between a commission brokerage program, and an advisory program, says Terry Frank, managing director at Century Securities in St. Louis. “I don’t think it’s compliance issues–it’s more compliance work, getting the forms correct, making sure the clients sign them and getting it done before the deadlines.”