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News September 5, 2005 Issue

Fee-Based Date Debate Continues

The Securities Industry Association has reiterated its request that the SEC extend the compliance date for the financial planning and discretionary brokerage aspects of the fee-based brokerage rule.

In an August 25 letter, the SIA attempted to bolster its case that the brokerage industry truly needs more time to implement the rule, by providing greater detail on exactly what the implementation will entail. The group noted that standard account opening documents used by brokerage firms typically do not distinguish between full and limited discretion. As a result, said the SIA, broker reps will have to determine, on case-by-case basis for the "vast majority of their accounts," the extent of their discretion and whether the customer wants the account to be a discretionary advisory account or a non-discretionary brokerage account going forward.

The SIA’s letter followed requests by the Investment Adviser Association and consumer groups urging the SEC not to grant the SIA’s extension request. The consumer groups suggested that the SIA’s request was a ploy to give SEC Chairman Christopher Cox time to soften the rule’s requirements. "Perhaps the SIA hopes that changes in leadership at the Commission will offer them a new opportunity to water down the rule’s protections," said Fund Democracy, the Consumer Federation of America and other groups in an August 11 letter. The timing of the SIA’s petition, they said, seems "at best highly questionable," given the SIA’s long-standing opposition to the rule.

Like the IAA, the consumer groups noted that SIA had not previously raised implementation issues. The SIA’s request to delay implementation of the rule’s discretionary provisions, they said, was "particularly egregious" given that "it has long been clear" that that provision would be added to the final rule.