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Write to Acting SEC Chairman Unger Write to SEC Commissioner Hunt Write to SEC Commissioner Carey This page was last updated on May 15, 2001. No Free Pass for Broker-Advisers
Paul Roye, head of the SEC's investment management division, recently announced that he would recommend that the SEC adopt a rule giving brokers who provide investment advice a free pass from regulation as investment advisers. This rule proposal poses the greatest threat to investor protection of any SEC rule in recent memory. The rule will enable brokers to advise clients to buy or sell securities, and then execute the trade with the broker's own account without the clients' permission. It also will deprive shareholders of information about the brokers' fees, services, and conflicts of interest that advisers are required to provide. Brokers' relationships with their customers are subject to minimal regulation because a broker's role as salesman is somewhat limited. Investment advisers' relationships with their clients are subject to regulation befitting the fiduciary nature of the relationships. The SEC rule ignores this distinction and subjects brokers to the lower standard of regulation even when they are providing investment advice. For more information on the rule, see the SEC's proposal and links to public comment letters on the proposal. The comment letters submitted by the Financial Planning Association and the Investment Counsel Association of America are particularly helpful. The Merrill Rule also was a topic during the first panel at the SEC's May 23 conference on investment adviser regulation. See also [Mercer Bullard, TheStreet.com (May x, 2001)]; Mercer Bullard, Barbarians at the Gate, On Wall Street (June 2000) & Financial Planning Magazine (June 2000); Paul Farrell, Gordon Gekko Still Rules Wall Street: Ethics Losing to Greed -- Where's the SEC? CBS.Marketwatch.com (May 30, 2000); Christopher Schmitt, Battle Continues Over Exemption for Flat-Fee Accounts, TheStreet.com (May 23, 2000); and Christopher Schmitt, Wall Street Wants Flat-Fee Accounts Exempted from Investment-Adviser Rules, TheStreet.com (May 5, 2000). If you oppose this rule, please send a letter to any or all of the SEC Commissioners. It also may be helpful to write to members of the Senate Finance Committee. The Committee will soon hold hearings on Harvey Pitt's nomination as the new SEC Chairman, and they will be question Pitt about his views on pending matters. Provided below are contact information and pre-written letters for the SEC Commissioners, and Finance Committee Chairman and ranking minority member, as well as a complete list of other Finance Committee members.
Related documents: Mercer Bullard, Proposed SEC Rule on Brokers Makes No Sense, TheStreet.com (May 15, 2001) List of electronically-filed public comments on broker-adviser exemption Financial Planning Association Comment Letter (Jan. 14, 2000) Investment Counsel Association of America Comment Letter (Jan. 12, 2000) SEC Roundtable on Investment Adviser Reglatory Issues (May 23, 2000)
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