As I’m sure you know by now, the SEC released its much-awaited “Study on Investment Advisers and Broker-Dealers” late Friday night, which examines the appropriate standard of client care for brokers. (In my view, it’s a way too high-tech world when even bloggers can’t get a scoop.)

You’ve also probably heard that the Study has been roundly hailed as a great step forward by the proponents of a genuine fiduciary standard for all retail financial advisors, and met with grave reservations and predictions of dire consequences by the opponents of the standard such as SIFMA and the FSI [both organizations expressed qualified support on the Study's findings].

Overall, I suppose I share in the optimism about the Study, or at least, a strong sense of relief that it’s a lot better than many of us feared it might be. For one thing, in my experience, anytime SIFMA and the FSI are strongly against something, the subject of their scorn is almost always in the best interest of financial consumers.

On a more substantive note, the Study is very clear on two key points: That it is by far in financial consumers’ best interest to have a “uniform” standard for brokers and investment advisors alike; and that this single standard should be at least as stringent as the current fiduciary standard for investment advisors under the ‘40 Act.

But as encouraged as I am by the fact that both of these points are stated in the Study numerous times, there are a couple of items that caught my eye while I was wading through the 208-page tome over the weekend which made me less sanguine about it than I might otherwise be.

First, while the Dodd Frank Act requested a study on the potential of fiduciary standard for brokers from the SEC, the Study released Friday came from the SEC “staff.” Admittedly, this is a subtle point. Yet, I suspect it’s no accident that all the great support the Study gives to a strong, uniform fiduciary standard for brokers and advisors comes only as staff recommendations subject to approval or rejection from the Commissioners themselves. Could this Study could be nothing more than a trial balloon to see which way the political winds are currently blowing?

Secondly, I found troubling the Study’s lengthy discussion on why simply eliminating the “broker-exclusion” under the ‘40 Act would be an unsatisfactory method to achieve the uniform standard in question. Because this solution, to my mind, is the simplest and most direct, the weak arguments against it raise the specter of an ulterior motive.

Section IV, part E,1 [on page 140 of the linked PDF, at left, of the Study, if you want to follow along] reads as follows:

The Staff believes that the additional potential drawbacks to [the elimination of the broker exclusion] include the following:

  1. They could prevent the Commission from evaluating the existing regulatory regimes and applying the best elements of each to advisers and broker-dealers;
  2. They might result in fewer investor choices; and
  3. They would likely be more costly for investors and the industry…”

Oh, say it ain’t so! The SEC couldn’t use elements from the FINRA “regime” (which is the problem we’re trying to solve here), the old “investor choice” argument which has never held water, and the bogeyman of “likely” higher costs

If this is the best they can come up with for not doing the “simple thing,” it raises the question of why don’t they really want to do it. Could it be that “more complex” leaves more room for a weaker standard simply called “fiduciary”?

I hope I’m wrong here, but I don’t think I’ll be popping the Champagne just yet.