Commission Reopens Comment Period on Rule Proposal Regarding Full Service Brokers that Charge Asset-Based Fees


Washington, D.C., Aug. 19, 2004 -- The Securities and Exchange Commission today reopened the public comment period on a proposed rule, originally proposed on Nov. 4, 1999, to address the application of the Investment Advisers Act of 1940 (Advisers Act) to brokers offering full service brokerage service, including advice, for a fee based on the amount of assets in customers' accounts, instead of traditional commissions, mark-ups and mark-downs.

Due to the form of compensation they receive, brokers who charge their customers asset-based fees may be subject to regulation under the Advisers Act, as well as the Securities Exchange Act of 1934. The proposed rule makes the nature of the services provided, rather than the form of compensation, the primary factor in determining whether the Advisers Act applies.

Under the proposed rule, if the broker does not have discretionary authority to trade securities in an account, the Advisers Act generally would not apply to that account. If the broker does have discretionary authority and charges an asset-based fee, the account would be subject to the Advisers Act.

The Commission reopened the comment period for the rule, accessible at, because of significant continuing public interest in the proposal. Comments on the proposal are due by Sept. 22, 2004 and the Commission intends to reach a final decision on the proposal by Dec. 31, 2004.

For further information concerning the proposed rule, contact Robert L. Tuleya, Attorney-Adviser, or Nancy M. Morris, Attorney-Fellow, Office of Investment Adviser Regulation, SEC Division of Investment Management, at (202) 942-0719.

See Also:  Proposed Rule Release No. 34-50213 (August 18, 2004); Proposed Rule Release No. 34-42099 (November 4, 1999)
Last modified: 8/19/2004