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U.S. Securities and Exchange Commission

SEC Awards Contract for Study to Compare Roles of Investment Advisers, Broker-Dealers

Study to Research Current Industry Practices and Identify Investor Perspectives on Their Relationships with Financial Service Providers


Washington, D.C., September 26, 2006 - The U.S. Securities and Exchange Commission has awarded a contract to conduct factual research and analysis for a major study comparing how the different regulatory systems that apply to broker-dealers and investment advisers affect investors.

"Our goal is improved investor protection through updated SEC regulations that deal with the realities of today's marketplace," Chairman Christopher Cox said. "The study will develop the best available information, from inside and outside of the Commission, to inform this important process."

Twelve bidders responded to the Commission's August 1 "Request for Proposal," providing the SEC with a range of thoughtful options. Those submitting proposals included respected academics, consulting firms, law firm practitioners, and research organizations. After a rigorous, competitive process, the SEC has selected the RAND Corporation. The SEC looks forward to completion of a first-class empirical study and, in the process, looks forward to continued active public interest and input.

The SEC first suggested a study in connection with a rule adopted in April 2005, allowing broker-dealers to offer fee-based brokerage accounts without being required to comply with the Advisers Act. The rule was the subject of a large number of comments. The Commission determined, however, that many of the concerns that commenters raised in the rulemaking went well beyond the scope of the proposed rule, and thus were best addressed by the study. The study RAND will conduct will explore those concerns and examine how the different regulatory regimes affect investors.

The release adopting the 2005 rule directed the SEC staff to report on recommendations for a study. In March 2006, after considering the staff's recommendations and consulting with the other Commissioners, Chairman Cox announced that a study would be conducted. In June 2006, the SEC solicited public comment on a draft "Request for Proposal" and sought indications of interest. After making changes to the draft request in response to the comments, the SEC released the RFP on Aug. 1, 2006, with responses due by Aug. 24, 2006. A panel of senior SEC staff carefully evaluated all of the proposals for technical quality, and advised the contracting officer, who awarded the contract to the offeror whose proposal represented the best value to the government.

Work planning on the contract awarded today will begin immediately. Consulting with the Commission's professional staff, the RAND Corporation will collect, categorize, and analyze empirical data from a wide variety of sources. RAND will study information on subjects such as the ways in which broker-dealers and investment advisers market, sell, and deliver financial products, accounts, programs and services to individual investors. Among the tasks to be performed under the contract, RAND will conduct interviews of interested parties, including industry groups, regulators, and investor advocates; will conduct an extensive search of relevant economic and business literature; will collect relevant business documents; will interview broker-dealers, investment advisers, and their respective associated persons; will conduct investor focus group interviews; and will summarize and evaluate the data for the Commission's use in assessing the current legal and regulatory environment.

The RAND Corporation is an independent, nonprofit organization formed more than 50 years ago to further and promote scientific, educational, and charitable purposes for the public welfare and security of the United States. The study will be conducted by RAND's Center for Corporate Ethics, Law, and Governance, whose mission is to improve public policy through objective, empirical research and analysis. The RAND Corporation has experienced researchers on staff, specialized resource offices to support their work, and relationships with academics from well-known law and business schools. In performing the contract tasks, RAND will draw on internal resources as well as engage additional expert assistance, as necessary, to complete the study.

The full text of the RFP on which the contract is based can be accessed on the Commission's website at http://www.sec.gov/news/extra/2006/sechq1-06-r-0177.pdf. It was also posted at http://www.fedbizopps.gov, a website concerning federal government procurement opportunities.

The SEC's rule release providing for the study appears on the SEC's website at http://www.sec.gov/rules/final/34-51523.pdf.



Modified: 09/26/2006