The SEC Requests Information on Broker-Dealers and Investment Advisers Regulatory Approaches

On Friday, March 1, 2013, the Securities and Exchange Commission (the "SEC") issued a release requesting data and other information, in particular quantitative data and economic analysis, relating to the benefits and costs that could result from various alternative approaches regarding the standards of conduct and other obligations of broker-dealers and investment advisers.  The SEC expressed concerns in the release regarding the blurring of lines between investment advisers and broker-dealers, and referenced studies suggesting that many retail customers are not aware of the differences in regulatory oversight of these entities and the differing duties to which they are subject.  At present, investment advisers are fiduciaries to their clients and regulated in a largely principles-based manner by the Investment Advisers Act of 1940.  In contrast, broker-dealers are not uniformly considered a fiduciary to their customers, and are subject to comprehensive regulation under the Securities Exchange Act of 1934 and the rules of the particular self-regulatory organization to which a broker-dealer belongs.

In a study required by Section 913 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the SEC staff recommended that the SEC: (a) engage in rulemaking to implement a uniform fiduciary standard of conduct for broker-dealers and investment advisers when providing personalized investment advice about securities to retail customers; and (b) consider harmonizing certain regulatory requirements of broker-dealers and investment advisers where harmonization would enhance meaningful investor protection, taking into account the best elements of each regime.  The SEC plans to use the requested data as it develops its rulemaking proposals.

Read the SEC release