ICI Supports Revised Broker-Dealer Regulation ProposalWashington, DC, February 7, 2005 - The Institute supports a proposed rule that exempts certain broker-dealers from the Investment Advisers Act of 1940, noting that it provides greater clarity about investor protections under the Act. Background
Changes to Rule 202(a)(11)-1 of the Investment Advisers Act of 1940, originally proposed in 1998, would exclude a broker-dealer providing investment advice from regulation under the Advisers Act if: - the advice is provided on a non-discretionary basis;
- the advice is solely incidental to its brokerage services; and
- the broker-dealer discloses to its customers that its accounts are brokerage accounts.
ICI Position
As recommended by the Institute, the SEC studied the advisory services provided by broker-dealers, whether those services should trigger regulation under the Advisers Act, and what advisory services of the broker-dealer are "solely incidental" to its brokerage services. In its recent comment letter, the Institute states that the resulting proposal is well-reasoned and clarifies when clients of a broker-dealer are entitled to the protections of the Advisers Act. ICI concurs with the SEC's approach to treat all accounts over which a broker-dealer exercises investment discretion as advisory accounts, regardless of the broker-dealer's form of compensation. Similarly, the Institute strongly supports both the placement and content of the disclosure that would be required of broker-dealers relying on the exclusion. The Institute notes that such disclosure should help investors make informed decisions regarding whether to retain a broker-dealer or an investment adviser to assist them in fulfilling their investment goals. Related Links
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