Random samplings of news affecting
the estate planning industry

Compiled by Christopher Weems, Associate Editor

Send an e-mail with your news item

Financial Planning Association may oppose SEC nominee over controversial rule

ATLANTA-- The Financial Planning Association (FPA) has urged members of the Senate committee charged with approving the nomination of Harvey Pitt as chairman of the Securities and Exchange Commission to ask his position on a proposed SEC rule that threatens to seriously erode investor protection. If Pitt is ultimately confirmed by the Senate, FPA said it will ask him to oppose the rule.

The proposed rule would generally permit broker-dealers to avoid registration under the Investment Advisers Act of 1940 (Advisers Act) while acting as investment advisers. If adopted, the rule would mean the brokers who provide investment advice would not be held to the higher standard of fiduciary conduct required of CERTIFIED FINANCIAL PLANNER(TM) practitioners and others who are registered investment advisers.

Noting that a number of other major financial services and consumer organizations have joined in opposing the SEC proposal, including AARP and the Consumer Federation of America, FPA urged U.S. Senators to raise the issue during the confirmation hearing.

"Under current law, investment advisers are required to provide clients with detailed information about their services, fees, and conflicts of interest through extensive disclosure requirements mandated by the SEC and the states," said Guy M. Cumbie, CFP(TM), a financial planner from Fort Worth, TX, and president of FPA. "This proposed rule would mean that brokers who provide the same investment advice would be held to a meaningless level of disclosure by only having to tell clients that their accounts are 'brokerage' accounts.

"At the very time that many large brokerage companies are advertising that they will provide consumers with independent, objective advice, this proposed rule would allow them to be regulated only as sellers of investment products, without having to meet the additional, higher standards of those who offer objective investment advice," Cumbie said.

"Investment advisers are also prohibited from recommending stocks to a client and then selling the stocks to clients from their own inventories without the client's consent. The public would cry foul if physicians routinely wrote prescriptions to be filled from their own privately owned pharmacies without informing the patient," he said. "Yet the proposed rule would allow stockbrokers to sell their customers stocks from their own inventory without the client's knowledge.

"FPA believes that full, clear disclosure serves the best interests of all parties, including investors, financial service providers and regulators.

Unfortunately, this proposed rule would move us in the opposite direction and would undermine consumer confidence in financial services professionals. If he is confirmed, we urge Mr. Pitt to scrap this proposed rule -- or any such rule -- that makes it more difficult for consumers to understand the intent of those who are offering financial services."