Knowing When to Fold 'Em

Thompson, Duane
July 2005
Journal of Financial Planning;Jul2005, Vol. 18 Issue 7, p20
Academic Journal
This article discusses the recent adoption of a broker and dealer exemption by the U.S. Securities and Exchange Commission (SEC), as of July 2005. Its unwavering mantra all along has been that fee-based brokerage programs help align the interests of the broker more closely with the customer. I have no problem with that. I do have a problem with how they are regulated in offering those programs under sales agent rules--along with the tremendous amount of confusion the SEC has generated among investors by allowing brokerage firms to hold out as financial consultants without being subject to fiduciary adviser rules. When the SEC hastily proposed the broker/dealer exemption in 1999, it was forced to bypass, somehow, the statutory exemption for broker/dealers in the Investment Advisers Act of 1940. Under the 1999 proposal, the SEC decided to avoid the issue. As ludicrous as this dire warning to stay away from a commonsense definition might sound, the problem with it is that the Financial Planning Association and others objecting to the rule never suggested brokers should not provide broad advice about markets, or advice in connection with a transaction where they are paid through a commission. Thus, the SEC leaves the door wide open for a heated debate over what part of financial planning is solely incidental, while it closes the door shut and says stockbrokers may continue to use confusing marketing terms that imply comprehensive advice. The other key change in the final rule that may only be a cosmetic change is the disclosure requirement.


Related Articles

  • SEC Fiduciary Rule 'Major Focus'.  // Investment Advisor;Nov2013, Vol. 33 Issue 11, p56 

    The article discusses the efforts of the U.S. Securities and Exchange Commission in developing a fiduciary duty rule for brokers.

  • BDA, Nixon Peabody Publish MA Paper. Glazier, Kyle // Bond Buyer;7/2/2014, Vol. 1 Issue 34136, p1 

    The article reports that the Bond Dealers of America has released Nixon Peabody LLP prepared municipal advisor paper to explain issuers the impact of their relationships with the brokers on the U.S. Securities and Exchange Commission's municipal advisor registration rule. It further states that...

  • FPA v. SEC: What's Next? Thompson, Duane // Journal of Financial Planning;Jul2007Supplement, Vol. 20, p24 

    The article discusses conflict between the Financial Planning Association and the United States Security and Exchange Commission. The conflict is due to challenges the association has made against Rule 202, which exempted fee-based brokerage programs from the Investment Advisers Act of 1940. The...

  • New Template Offers Help for Drafting ADV Disclosure Documents.  // Journal of Financial Planning;Sep2006 Supplement, p27 

    The article reports that the Financial Planning Association will launch the FPA ADV Part II-Template, a tool designed to assist planners and advisers to meet the mandatory requirements of the Securities and Exchange Commission, in late 2006. The teamplate is similar to the Financial Planning...

  • ERISA Fiduciary Responsibilities and Registered Investment Advisors. Geller, Sheldon M. // CPA Journal;Jan2007, Vol. 77 Issue 1, p56 

    The article presents information on the responsibilities of plan sponsors as Employee Retirement Income Security Act (ERISA) fiduciaries. ERISA fiduciaries must discharge their duties for the exclusive benefit of plan participants. Plan sponsors retaining registered investment advisors (RIA) may...

  • SEI report: SEC optimistic about manager compliance.  // Pensions & Investments;10/15/2007, Vol. 35 Issue 21, p35 

    The article reports that according to financial management provider SEI Corp., the U.S. Securities & Exchange Commission (SEC) has high hopes for its investment manager compliance programs. In an SEI survey of 52 chief compliance officers and fund executives, senior SEC officials have indicated...

  • The 2011 Top Wealth Managers: The State of the Wealth Manager Industry. PALAVEEV, PHILIP; McQUADE, JONATHAN // Investment Advisor;Sep2011, Vol. 31 Issue 9, p17 

    The article offers information on the AdvisorOne 2011 Top Wealth Manager Report. It states that the report is open to firms that describe themselves as wealth managers and have their own registration as a registered investment advisor with Securities and Exchange Commission. It mentions the...

  • Most Hedge Funds Remain Registered. Glover, Hannah // Investment Management Weekly;1/22/2007, Vol. 20 Issue 3, p6 

    The article reports that only 10% of hedge fund advisors that signed up with the U.S. Securities & Exchange Commission before the February 1, 2006 deadline have opted to withdraw after the fight for the right to remain unregistered, while the remaining are getting ready for examinations. The...

  • Dream Stealers.  // Journal of Financial Planning;Nov2001, Vol. 14 Issue 11, p10 

    The editorial focuses on the role of compliance in the lives of financial planners. From the planner's perspective, meeting compliance requirements, whether it's the U.S. Securities & Exchange Commission, the National Association of Securities Dealers, the states or broker/dealers, is a daily...


Read the Article


Sorry, but this item is not currently available from your library.

Try another library?
Sign out of this library

Other Topics