Regulatory Spotlight
Brokers' Liability for Advice
June 4, 2007; Page R2
Call it the $276 billion question: That is the estimated amount of money in about 1 million fee-based brokerage, or "wrap," accounts. The fate of this money is up in the air after the U.S. Securities and Exchange Commission last month threw in the towel on a controversial rule.
The SEC said it wouldn't fight a March federal-court decision that abolished the rule, which shielded brokers from some liability for advice they gave to holders of fee-based accounts…….
The rule was controversial because it exempted stockbrokers who oversee fee-based accounts from a fiduciary duty when providing "incidental" advice tied to buying and selling securities.
A fiduciary duty requires acting in a client's best interest. The Financial Planning Association protested in court that stockbrokers were collecting the same fees as investment advisers for similar advisory work -- without having to meet the stiff fiduciary legal standard.
In the wake of the SEC retreat, some firms told financial advisers to stop offering fee-based brokerage accounts immediately,
Draw your own conclusions why that may be ....and hold onto your wallet.
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