SIFMA provides comments to the Securities and Exchange Commission (SEC) on a study regarding obligations of brokers, dealers, and investment advisers, Exchange Act Release No. 62577, Investment Advisers Act Release No. 3058; File No. 4-606.
SIFMA is appreciative of the opportunity to meet with representatives of the SEC on November 10th to review SIFMA's analysis of potential changes to the standard of care for investors served by SIFMA member firms. As noted in previous public statements, SIFMA supports harmonization of broker-dealer and investment adviser regulations for those who provide personalized investment advice to retail investors. SIFMA believes this can be accomplished in a way that does not restrict customer choice or product access. SIFMA commends the SEC for the depth of review it is undertaking in its current study.
The key findings from our study show that broker-dealers play an important role in retail brokerage, which cannot be easily replicated with alternative service models. Findings are summarized in this letter.
SIFMA recognizes that the legislation does not prohibit commission-based compensation or other common elements of the broker-dealer service model. Survey results bear out the relative value of commission-based accounts, particularly for smaller investors. If these same brokerage services had to be provided under the existing provisions of the Investment Advisers Act of 1940, however, it would negatively affect client choice and access to products, such as those now available on a principal basis. Thus, SIFMA continues to support a uniform federal fiduciary standard for broker-dealers and investment advisers who provide personalized investment advice to retail clients, yet that new standard must be “operationalized” to reflect the many different business models currently in effect serving investors.
SIFMA has drafted this letter to respond to SEC staff requests for additional detail on the methodology used to complete the study, the robustness of the data gathered, and several exhibits contained in the original submission. Accordingly, SIFMA's response is organized as follows:
- Methodology for impact assessment
- Robustness of data gathered
- Additional data
SIFMA is grateful for the opportunity to respond to SEC staff questions and for the consideration of the findings from the study.