Twitter was abuzz Tuesday with ruminations that President Donald Trump’s Supreme Court nominee, Brett Kavanaugh, had a hand in the death of the Merrill Lynch Rule a decade ago.
Skip Schweiss, head of advisor advocacy and industry affairs for TD Ameritrade Institutional, tweeted Tuesday that “history is fascinating!” while pointing to a ThinkAdvisor article from 2007 that reported on the Financial Planning Association’s victory in its court battle against the Securities and Exchange Commission.
The three-judge panel of the U.S. Court of Appeals for the D.C. Circuit ruled 2-1 on March 30, 2007, that the SEC lacked the authority to exempt broker-dealers who collect fees as well as commissions from the fiduciary requirements of the Investment Advisers Act of 1940, ThinkAdvisor reported.
The SEC had 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 Investment Adviser Act fiduciary requirements.
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“Judge Brett Kavanaugh and Judge Judith Rogers agreed with the FPA, Denver, that another part of the paragraph that refers to brokers and dealers who receive ‘special compensation’ clearly prohibits the SEC from exempting broker-dealers with fee-based compensation arrangements” from the Advisers Act.
Schweiss told ThinkAdvisor on Tuesday that the D.C. Circuit’s 2007 decision in FPA vs. SEC “was a landmark for the advice business.”
The court held that the SEC “had overstepped by allowing brokers to charge fees – ‘special compensation’ – for advice, in violation of the Investment Advisers Act of 1940.”