The Financial Planning Association announced yesterday that it has filed a petition in the U.S. Court of Appeals for the District of Columbia Circuit, seeking review of the SEC’s decision earlier this month to extend the “Merrill Lynch” exemption, which allows registered reps to call themselves financial advisors. The FPA hopes to have the rule withdrawn.

“FPA believes that the rule is contrary to law and encourages broker-dealers to engage in self-dealing with their clients without disclosing their conflicts of interest,” said James Barnash, president of the FPA.

The rule, which says registered reps can call themselves financial advisors, as long as they adhere to a trio of rules (see http://registeredrep.com/news/sec-brokerdealer-ruling/), has been the subject of bitter dispute that pits financial planners and registered investment advisors against retail brokers. The SEC adopted the rule as a temporary measure when industry representatives requested the exemption in 1999. Under SEC rules, registered reps are only supposed to offer advice that is incidental to the sale of securities; registered investment advisors, who do not sell securities, can be paid for advice. The Commission has struggled with the exemption since 1999, adopting another temporary rule in December to study the issues. Even when the final version was approved earlier this month, the SEC published a directive from Chairman Donaldson calling for further study.

The FPA, which represents RIAs and argued against extending the exemption, says that modifications by the SEC—including requiring additional disclosure conflicts of interest by reps—are not enough. The FPA is hoping to have the current petition combined with its original suit to end the exemption, which was filed last July. “If you read the statements by proponents of the rule, they argue that suitability is a good enough standard, and at times they may even be held to a fiduciary standard. That is not good enough,” says Barnash.

The FPAs ultimate goal? “We’d like to have the rule withdrawn completely,” says Barnash. He also says he would like to see a wider discussion with all interested parties about the industry’s current system of rules and regulations, which he terms “antiquated.”