Subject: File No. S7-25-99
From: Stephen A. Batman, Chief Executive Officer
Affiliation: 1st Global Capital Corp.
February 7, 2005
1st Global Capital Corp. ("1st Global") is a fully disclosed retail broker-dealer registered to conduct business in all domestic jurisdictions, with over 1200 Registered Representatives offering securities services through nearly 600 branch and non-branch locations.
As the Chief Executive Officer of 1st Global, I appreciate the opportunity to submit comments on the issues raised in the above captioned proposed rulemaking by the Securities and Exchange Commission ("Commission").
1st Global is in favor of the proposed policy direction on this matter. We offer the following specific additional comments.
1st Global believes that broker-dealers who provide these programs should provide meaningful, plain English disclosures concerning the specific nature of the advice that will be offered. Such disclosures should emphasize that advice provided in connection with fee-based brokerage programs is limited to that advice which is necessary to select one or more individual securities that meet the client's suitability requirements at the time of the recommendation. The disclosures should make clear that these programs are not intended to provide comprehensive financial advice based on a client's individual personal and financial goals and objectives. It should be clear to clients using such programs that fee-based brokerage programs are nothing more than brokerage trading accounts that provide clients with the ability to actively trade individual securities by paying a fee based on the value of the assets in the account rather than traditional commissions. The disclosures should also include a discussion of the substantial differences between actual comprehensive personal financial advice based on broad, comprehensive goals and objectives (i.e. health care, education, estate planning, tax management, retirement planning, special needs planning, etc.) and trading of individual securities (i.e. stocks, bonds, options, ETF's, mutual funds, etc.). We do not believe that merely refraining from calling fee-based brokerage programs "financial planning" would be sufficient to ensure that clients understand and appreciate the differences between the obligations of broker-dealers and investment advisers have to their clients or the distinctions in the levels of services clients will receive. Rather we believe that such disclosures should include side-by-side comparisons of the commissions and fees that will be charged to a typical account and a discussion of any additional products and services that will be offered to clients who participate in these accounts and the fact that such products and services will be offered at additional cost.
Solely Incidental Exemption
We do not believe that this issue should turn on the label a registered representative uses with clients or the terminology a broker-dealer uses to identify its registered representatives. We do not believe that labels should have any bearing on the issues raised in the proposal. We believe that an affirmative disclosure regime as discussed above will be more than sufficient to ensure that the client has an appropriate understanding of the services being offered regardless of the title used by the registered representative.
Lastly, we support the position that all discretionary brokerage accounts must be treated as advisory accounts.
Again, we thank the Commission for the opportunity to comment on these important issues.
Stephen A. Batman
Chief Executive Officer
8150 North Central Expressway, Suite 500
Dallas, TX 75206
Securities offered through 1st Global Capital Corp.
Advisory services offered through 1st Global Advisors, Inc.
Insurance services offered through 1st Global Insurance Services, Inc.
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