Statement of CFA’s Director of Investor Protection
Barbara Roper in Response to the Appeals Court Decision in the FPA
Lawsuit
Today the
United States Court of Appeals for the District of Columbia Circuit
decided in favor of the Financial Planning Association in its lawsuit
against the Securities and Exchange Commission and vacated the agency’s
fee-based brokerage account rule. CFA’s Director of Investor Protection
Barbara Roper issued the following comment on the decision.
“This decision represents an important step forward for investors.
Congress adopted the Investment Advisers Act to ensure that all those
who act as advisers or who are compensated as advisers put their
clients’ interests ahead of their own and disclose conflicts of
interest. For decades the SEC has flouted congressional intent by
allowing brokers to market themselves as advisers and give extensive
personalize investment advice without subjecting them to the
requirements of the advisers act. That has made it virtually impossible
for investors to make an informed choice among different types of
investment services providers and has exposed them to hidden conflicts
of interest in what they rely on as disinterested advice.
“Although the rule included provisions that offered potential
benefits to investors – by defining both discretionary accounts and
financial planning services as advisory services – it still left an
enormous loophole permitting brokers to call themselves advisers, market
their services based on the advice offered, and still escape regulation
as advisers. Moreover, the Commission has interpreted the financial
planning provision of the rule in a way that deprives it of all
meaningful investor benefits.
“Investors deserve a regulatory policy that both enables them to make
an informed choice among different types of investment professionals and
ensures that all those who are engaged in giving personalized investment
advice act in their clients’ best interests. If the court decision
ultimately leads to this outcome it will be an enormous and long-overdue
victory for investor protection and rational regulation.”
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CFA is a non-profit association of 300 organizations that, since
1968, has sought to advance the consumer interest through research,
advocacy and education.
