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Breaking News

May 14, 2007

ACA Insight Breaking News - IM Insight Breaking News - SEC Gives Up Fee-Based Brokerage Fight

The SEC has just announced that it will not fight the court's March 30 decision in FPA v. SEC. The SEC did, however, ask the court for a 120-day stay of its ruling overturning the fee-based brokerage rule.

“The Commission is committed to taking the opportunity provided by this decision to improve investors’ ability to make educated decisions about their investment accounts and their financial services providers,” said SEC Chairman Christopher Cox in a statement.

The SEC plans to consider "whether further rulemaking or interpretations are necessary regarding the application of the Advisers Act to these accounts and the issues resulting from the court’s decision." The SEC said that it will work with individual brokerage firms during the transition period.

Chairman Cox also announced that he has approved additional emergency funding to accelerate the IA-BD study. "The previously-commissioned study, by the RAND Corporation, will be delivered to the Commission no later than December 2007, several months ahead of schedule," according to the SEC's statement. "The results of the study are expected to provide an important empirical foundation for considering improvements in regulatory and legislative rules that date back to the 1930s."

SIFMA, which has urged the SEC to seek a rehearing of the court's decision, promptly issued a statement expressing its "outrage" over the SEC's announcement. The SEC's decision not to seek a rehearing "leaves investors in the lurch," said the group. "SIFMA pledges vigorously to pursue a solution that will enable investors to have access to fee-based payment options and that will not force investors into a world of one-size-fits-all accounts."

In contrast, the Financial Planning Association applauded the SEC's decision. "FPA agrees that the agency should provide a reasonable deadline for transitioning fee-based accounts to commission accounts or to Advisers Act jurisdiction,” said FPA managing director Duane Thompson, "However, the SEC should avoid an open-ended transition that would violate the intent of the court order." Thompson said that the FPA is studying the SEC's motion for a four-month delay of the court's decision to strike down the rule.

- IM Insight