Press Releases

Release Date: April 10, 2007

Contact:
Travis Larson, (202) 216-2057, tlarson@sifma.org

Fee-based Account Decision Should Be Reheard SIFMA Tells SEC

WASHINGTON, D.C., April 10, 2007 – The Securities Industry and Financial Markets Association (SIFMA) today announced that it is urging the Securities and Exchange Commission to ask the D.C. Court of Appeals for a rehearing on the issue of fee-based brokerage accounts.  Late last month, the court ruled in favor of the Financial Planning Association (FPA) in its case against the Securities and Exchange Commission, finding the SEC exceeded its statutory authority under Section 202(a)(11)(F) of the Investment Advisers Act of 1940 when it  adopted Rule 202(a) (11)-1, which exempted broker-dealers offering fee-based brokerage accounts from registering as advisers.

“This ruling has the potential to significantly impair an important element of consumer choice for American investors and we strongly urge the SEC to ask for a rehearing.  With this decision, one million investors, with nearly $300 billion in assets, could see a significant reduction in their range of choices and options for receiving and paying for financial services.  Investors deserve no less than robust choice and vigorous competition,” said Marc Lackritz, President and CEO of SIFMA.

Fee-based accounts were first introduced to better align consumer and broker interests, and these accounts have grown and served public investors for more than a decade.  The introduction of such accounts flowed from the recommendations of the Tully Committee, a broad-based industry committee which was formed at the urging of the SEC.  Today, they make up about 20% of all retail brokerage accounts.

Although the court’s decision focused on fee-based brokerage accounts, by vacating the entire rule the court also overturned other provisions of the rule, including a provision that clarified that broker-dealers have a fiduciary duty to their clients when providing financial planning services.  SIFMA believes that fee-based brokerage accounts are not the type of services that the Advisers Act was intended to address, and that the application of the Act is unnecessary given the extensive regulation to which broker-dealers are already subject under the Securities Exchange Act of 1934 and SRO rules, among others.

Rule 202(a)(11)-1 remains in effect until the court issues its mandate, which is expected to occur on or shortly after May 14, 2007, or later if the SEC seeks rehearing.

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The Securities Industry and Financial Markets Association brings together the shared interests of more than 650 securities firms, banks and asset managers. SIFMA's mission is to promote policies and practices that work to expand and perfect markets, foster the development of new products and services and create efficiencies for member firms, while preserving and enhancing the public's trust and confidence in the markets and the industry. SIFMA works to represent its members’ interests locally and globally. It has offices in New York, Washington D.C., and London and its associated firm, the Asia Securities Industry and Financial Markets Association, is based in Hong Kong.