Securities Law Prof Blog

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

Tuesday, August 3, 2010

SEC Seeks Public Comment on Investment Advice Study

The SEC published a request for public comment to inform its study of the obligations and standards of care of broker-dealers and investment advisers providing personalized investment advice about securities to retail investors.  The study is required under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, which President Obama signed into law on July 21, 2010.

As required by the Dodd-Frank Act, the SEC is requesting public input, comments, and data on issues related to the effectiveness of existing standards of care for brokers-dealers and investment advisers, and whether there are gaps, shortcomings, or overlaps in the current legal or regulatory standards.  The public comment period will remain open for 30 days, following publication of the comment request in the Federal Register.

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Commenting to the SEC at this point is a double edge sword because it is not an official comment period to proposed rules and regulations.

About 13 - 14 years ago, the US Treasury issued Treasury Inflation Protection Securities (TIPS) for the first time. Prior to the issuance, the Treasury put out two sequential notices. The first notice indicated that the Treasury was contemplating issuing an inflation protection security and asked for comments, a notice of an intent to issue rules and regulations for TIPS.

The Treasury received many comments from law firms, brokerage firms, banks, investors, academics, etc. Some of the comments were extensive, both in substance and in length.

After the comment period ended and the comments were reviewed, Treasury issued a second notice for comment on the actual proposed rules for TIPS. In comparison to the dozens if not hundreds of extensive comments during the first period, there were only eight comments to the proposed rules and most were not of major substance.

When the final rules were promulgated, the Treasury listed only the eight comments as comments to the TIPS rules.

"The Treasury Department published final rules on January 6, 1997, which sets out the terms and conditions for marketable inflation-protected securities. The final rules on marketable securities adopted, without substantive change, the proposed rules that were published for comment on September 27, 1996. Eight comment letters were received in response to the proposal."

In fact, the first set of comments is archived and not digitally available and not mentioned as part of the regulatory history of the inflation protection bonds. The Treasury will respond to an FOIA request for the earlier documentation.

While TIPS is not a controversial program and there is little call for its regulatory comments, the SEC's handling of regulatory reform and of broker-investment adviser obligations will be controversial.

Comments submitted at this point, although they may deal with specific, substantiative regulatory issues, might not be considered when the final rules are proposed and might not become part of the regulatory history of the final SEC rules promulgated under Dodd-Frank.

Commenters should be prepared to resubmit their comments when the comment period for the final proposed rules opens.

Posted by: Milton Recht | Aug 3, 2010 10:39:46 PM

the inflation protection bonds. The Treasury will respond to an FOIA request for the earlier documentation.

Posted by: /boostforex | Oct 17, 2010 11:19:46 AM

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