Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

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Monday, May 14, 2007

SEC Will Ask D.C. Circuit to Stay FPA v. SEC Decision

The brokerage firms were lobbying the SEC hard to file an en banc petition for reconsideration of the D.C. Circuit's FPA v. SEC (invalidating the SEC rule exempting brokers that offered fee-based accounts from regulation as investment advisers), and in a recent speech Commissioner Atkins expressed the view that the SEC should.  However, today it announced it would not.  Instead, it is asking the court for a stay of the decision.  Here are some excerpts:

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  ... 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  Commission suggests that investors carefully consider changes to their accounts.  It 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.

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