Press Release: Commission Seeks Time for Investors and Brokers to Respond to Court Decision on Fee-Based Accounts (Press Release No. 2007-95; May 14, 2007)
The SEC did not allege fraud but sought a 120-day stay of a court ruling in Financial Planning Association v. SEC that reclassified fee-based brokerage accounts as investment advisory services under the Advisers Act, affecting $300 billion in assets and one million accounts, to allow time for transition and regulatory review.
The U.S. Securities and Exchange Commission (SEC) sought a 120-day stay of a March 30, 2007, D.C. Circuit Court decision in Financial Planning Association v. SEC, which ruled that certain fee-based brokerage accounts must be regulated as investment advisory services under the Investment Advisers Act. The decision impacted an estimated one million accounts holding approximately $300 billion, creating regulatory uncertainty but involving no allegations of fraud or misconduct. The SEC declined to appeal the ruling, instead committing to evaluate rulemaking, improve investor disclosures, and accelerate a RAND Corporation study on financial product sales to inform future regulatory reforms.
The U.S. Securities and Exchange Commission (SEC) did not accuse any party of fraud but responded to a landmark court decision in Financial Planning Association v. SEC, issued on March 30, 2007, which reclassified fee-based brokerage accounts as investment advisory services under the Investment Advisers Act. This ruling affected an estimated one million accounts holding approximately $300 billion in assets, challenging the SEC’s longstanding regulatory exemption for such accounts. Rather than appealing the decision, the SEC requested a 120-day stay to provide investors and brokers time to adapt and understand the implications of the change. The agency pledged to assess whether new rules or interpretations were needed to clarify the distinction between brokerage and advisory services and to enhance investor transparency. To support this transition, SEC Chairman Christopher Cox approved emergency funding to accelerate a previously commissioned RAND Corporation study on the marketing and delivery of financial products, with findings due by December 2007—several months ahead of schedule. The study aimed to provide empirical data to guide potential reforms to regulations dating back to the 1930s. The SEC emphasized its commitment to helping investors make informed decisions about their account structures during this regulatory transition.
Extracted insights
- $300.00B $300 billion ≥$1B
- person christopher cox
- agency financial planning association v. sec affecting fee-based brokerage accounts
- company rand corporation
- agency sec chairman christopher cox
- agency sec no later than december 2007
- agency Securities and Exchange Commission
- court u.s. court of appeals for the district of columbia circuit
- SEC announced Request for 120-day stay of U.S. Court of Appeals ruling in Financial Planning Association v. SEC
- U.S. Court of Appeals for the District of Columbia Circuit issued decision on Financial Planning Association v. SEC affecting fee-based brokerage accounts
- March 30, 2007 court decision affects Estimated one million fee-based brokerage accounts holding $300 billion
- SEC Chairman Christopher Cox stated commitment to Improving investors' ability to make educated decisions about investment accounts
- SEC will consider Further rulemaking or interpretations regarding application of Advisers Act to fee-based accounts
- Christopher Cox approved Additional emergency funding to accelerate RAND Corporation study of financial products marketing and delivery
- RAND Corporation will deliver study to SEC no later than December 2007
- SEC issued press release 2007-95 on May 14, 2007
Commission Seeks Time for Investors and Brokers to Respond to Court Decision on Fee-Based Accounts FOR IMMEDIATE RELEASE2007-95 Washington, D.C., May 14, 2007 — The U.S. Securities and Exchange Commission today announced that it will ask a court to allow four months for investors and their brokers to respond in light of a court decision affecting an estimated one million fee-based brokerage accounts. In asking for a 120-day stay of the ruling of the U.S. Court of Appeals for the District of Columbia Circuit in Financial Planning Association v. SEC, the Commission announced it will not seek further review of the March 30, 2007 decision that affects customer accounts holding an estimated $300 billion. “The Commission is committed to taking the opportunity provided by this decision to improve investors’ ability to make educated decisions about their investment accounts and their financial services providers,” said SEC Chairman Christopher Cox. The court’s March 30 decision primarily affects fee-based brokerage accounts, but not the traditional commission or advisory accounts that comprise the majority of accounts with brokers. Customers may ask their brokers if they are affected by this decision. The Commission suggests that investors carefully consider changes to their accounts. The Commission will consider whether further rulemaking or interpretations are necessary regarding the application of the Advisers Act to these accounts and the issues resulting from the court’s decision. The Commission also will work with individual brokerage firms during the transition period as they respond to the March 30 decision. The goal will be to provide customers of the firms with the information and time they need to determine the appropriate form of securities services for them. Chairman Cox also announced that he has approved additional emergency funding to accelerate an on-going outside study of the marketing, sale, and delivery of financial products and services to investors in this area. The previously-commissioned study, by the RAND Corporation, will be delivered to the Commission no later than December 2007, several months ahead of schedule. The results of the study are expected to provide an important empirical foundation for considering improvements in regulatory and legislative rules that date back to the 1930s. http://www.sec.gov/news/press/2007/2007-95.htm Home | Previous Page Modified: 05/14/2007
Commission Seeks Time for Investors and Brokers to Respond to Court Decision on Fee-Based Accounts FOR IMMEDIATE RELEASE2007-95 Washington, D.C., May 14, 2007 — The U.S. Securities and Exchange Commission today announced that it will ask a court to allow four months for investors and their brokers to respond in light of a court decision affecting an estimated one million fee-based brokerage accounts. In asking for a 120-day stay of the ruling of the U.S. Court of Appeals for the District of Columbia Circuit in Financial Planning Association v. SEC, the Commission announced it will not seek further review of the March 30, 2007 decision that affects customer accounts holding an estimated $300 billion. “The Commission is committed to taking the opportunity provided by this decision to improve investors’ ability to make educated decisions about their investment accounts and their financial services providers,” said SEC Chairman Christopher Cox. The court’s March 30 decision primarily affects fee-based brokerage accounts, but not the traditional commission or advisory accounts that comprise the majority of accounts with brokers. Customers may ask their brokers if they are affected by this decision. The Commission suggests that investors carefully consider changes to their accounts. The Commission will consider whether further rulemaking or interpretations are necessary regarding the application of the Advisers Act to these accounts and the issues resulting from the court’s decision. The Commission also will work with individual brokerage firms during the transition period as they respond to the March 30 decision. The goal will be to provide customers of the firms with the information and time they need to determine the appropriate form of securities services for them. Chairman Cox also announced that he has approved additional emergency funding to accelerate an on-going outside study of the marketing, sale, and delivery of financial products and services to investors in this area. The previously-commissioned study, by the RAND Corporation, will be delivered to the Commission no later than December 2007, several months ahead of schedule. The results of the study are expected to provide an important empirical foundation for considering improvements in regulatory and legislative rules that date back to the 1930s. http://www.sec.gov/news/press/2007/2007-95.htm Home | Previous Page Modified: 05/14/2007