August 23, 2004
I wish to add my emphatic support for the complete withdrawal of the Broker-Dealer Rule Exemption.
Based on my experience as a practicing financial planner for over 25 years, a NASD arbitrator and an occasional expert witness in securities cases, it is inconceivable to me that any rational observer, at least one concerned with the interest of public investors, can support a Broker-Dealer Exemption. The recent fund scandals, closely following the accounting and corporate management scandals, should provide the entire wake up call necessary to justify the elimination of such an insupportable exemption.
In reading prior comments, I note that one of the points made in support of the exemption is that investors do not obtain any greater regulatory protection if the advice is provided under the auspices of an RIA. As I am not an attorney, I do not feel qualified to debate the law, however, as an NASD arbitrator and an expert witness in securities arbitration cases, I can assure you that respondent broker-dealer counsel often make a significant distinction in the responsibilities of BDs vs. RIAs.
Although admittedly simplistic, it seems obvious that the criteria for regulation should be if the shoe fits, wear it. In the regulation of investment advice, the concept of solely incidental is a form of black art that provides an unacceptable opportunity for abuse. Transactional brokerage services should be regulated in accordance with current laws. If providing investment advice for a fee, RIA regulations should apply. Broker-Dealer firms can easily avoid RIA regulation by restricting their services to comission based transactions. Dont penalize the investing public if the firms wish to expand their services to investment advice.
Harold Evensky, CFP