FOR IMMEDIATE RELEASE 99-147 Commission Issues Rule Proposal to Address Application of the Investment Advisers Act to New Brokerage Programs Washington, DC, November 5, 1999 -- The Securities and Exchange Commission this week proposed a new rule that would address the application of the Investment Advisers Act of 1940 (Advisers Act) to broker-dealers that charge fees based on the amount of assets in customers' accounts, instead of commissions and mark-ups. The proposal will be issued for a 60-day public comment period prior to being considered for final adoption by the Commission. SEC Chairman Arthur Levitt said, "This proposal represents a sensible way to allow full service brokerage firms to offer pricing choices to their customers without imposing unnecessary regulatory obstacles or sacrificing investor protection. Asset- based fee programs better align the interests of customers and their brokers. The proposed rule would assure, however, that when an account bears the fundamental characteristics of an advisory account, it will be subject to the Advisers Act." Currently, due to the form of compensation they receive, brokers that 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 new asset-based pricing of brokerage services is responsive to the "best practices" identified in 1995 by the Committee on Compensation Practices. That Committee, formed at the request of Chairman Levitt to identify the brokerage industry's "best practices," recommended that brokers shift at least a portion of their fees to asset-based compensation in order to better align the interests of the brokers, their registered representatives, and their clients. For further information concerning the proposed rule, contact Robert Plaze or Cynthia Fornelli in the SEC's Division of Investment Management at (202) 942-0720. # # #