February 7, 2005
I object to the rule as originally written and as recently proposed because it continues to be a detriment to the public. The majority of public does not know there is a difference between a stock broker licensed to sell securities and an investment advisor registered under the act. They do not know that the methods and levels of recourse are significantly different. They do not understand that by rule, giving them council as to time and price is not advice. They do not understand that if they try to sue a stockbroker for giving them bad advice that the broker and the firm will be able to stand behind suitability and sales practice rules, and that the bad advice is immaterial as long as it was suitable. The advertising being permitted deliberately implies that individuals licensed to sell securities are also licensed to give advice. Trying to redefine or further define what is incidental is, just makes the problem worse by creating more technicalities that will continue the confusion of the public.
This is not about methods of compensation. This is about holding out, disclosure, and accountability. I believe that there is a significant distinction and huge benefit for the public to know that those holding themselves out to give advice have a fiduciary responsibility to them. Many planners understand this distinction and have registered under the act and while also holding securities licenses. Many of the regional, Insurance, and independent Broker/Dealers have also dually registered. They recognize that under the law, it is the right thing to do. Over the last year, several large groups of brokers left one of the major Wall Street firms because the brokers were not allowed to register as advisors, nor would the firm themselves register. Why would the SEC want to put itself in the position of creating a rule that appears to be designed to exempt only one specific group within the industry from regulation that the rest adhere to? The proposed rule brings absolutely no benefit to the public, no clarity and no simplification.
Please let the rule expire. Anyone who holds out implies, markets, advertises or sells to the public that advice is part of what they do, should be required to register under the act. Rejecting this rule and requiring and registration under the act for holding out will have absolutely no impact to the Capital Markets. Capital Markets never has and does not purport to offer any advice when selling to the public.
In the end the title of the rule itself, Certain Broker-Dealers Not Deemed to Be Investment Advisers, highlights that this rule is for the benefit of certain broker-dealers, not all broker-dealers, not the broker-dealers that are already dually registered, and certainly not the public.
For 2004 U.S. Investor Perception Study see: http://img.ipost.com/client/t/tdwaterhouseinst/ADVOCACY_DOCUMENTS11_10_2004.pdf