– Editor’s note: ASA incorrectly stated that LPL Financial is a member. The story and image have been corrected.

Independent broker-dealers are urging the Securities and Exchange Commission to revise its advice standard proposal so as not to repeat mistakes made in the now-defunct Labor Department fiduciary rule.

“Our largest concern with Regulation Best Interest is the preamble,” the American Securities Association — which includes Raymond James and Stifel as members — told the SEC in its Aug. 7 comment letter.

“The preamble language plainly rejects the principles-based approach set forth in the proposed rule text and adopts a prescriptive approach that was based on Labor’s fiduciary rule,” which has been overturned, the group writes.

Adopting a principles-based approach “is the best course of action,” the broker-dealers state, “and we think that is what the commission intended to achieve based on the proposed rule text.”

At the time the SEC was drafting the proposals, “it appeared as though the SEC’s rules would have to coexist alongside the now vacated DOL ‘fiduciary rule,’ which would have provided extremely prescriptive standards and restrictions for retirement accounts, including IRAs,” the group writes.

Understandably, “the SEC may have felt constrained to adopt an approach more closely aligned with the DOL’s rule.” However, the group said that this constraint resulted in “unnecessary complexity and deviation from longstanding principles under the securities laws.”

In particular, “this constraint seems to unduly preference advisory programs and unintentionally restrict choice and access to financial services and investment products,” the group argues.

The group said it supports “a principles-based final rule that does not include complicating preamble language,” and offered the securities regulator ways to “simplify and clarify the proposals to better accomplish the commission’s goals of enhancing and improving investor protection, harmonizing applicable standards, and preserving the brokerage model.”

As to Regulation Best Interest for brokers, it is “overly complicated.”

By creating two different standards — a “fiduciary” standard for advisors and a “best interest” standard for broker-dealers, the agency has created a situation where “counterintuitively [it] could be read to impose a higher standard on broker-dealers than the ‘fiduciary’ standard imposes on investment advisers,” the group states.

What’s also unclear is whether a broker-dealer’s “duty of care is the same as, or higher or lower than, that of an investment adviser.”

Reg BI will also create a “regulatory preference” for the advisory model, the group maintains, because advisors will be able to address conflicts “through disclosure and informed consent,” while broker-dealers “must also mitigate or eliminate conflicts.”

The result: Investment advisors will be able to operate “with fewer restrictions on conflicts (and compensation streams), and will have less legal risk.”

Such “differences could lead to a transition away from brokerage towards advisory as a customer’s ability to choose the brokerage model decreases.”