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Sunday, June 23, 2024 | Back issues
Courthouse News Service Courthouse News Service

Investment Advisors Still May Sell to Their Clients

WASHINGTON (CN) - Investment advisers with a sideline as broker-dealers may continue to sell securities held in the proprietary accounts of their firms to their advisory clients, according to regulations issued by the Securities and Exchange Commission.

The regulations adopt temporary rules the commission issued after a decision by the U.S. District Court for the District of Columbia. The court decision made broker-dealers offering fee-based brokerage accounts subject to the Advisers Act of 1940, which required that they register as investment advisers, provide written trade-by-trade disclosures, and obtain trade-by-trade consent after the client had received the disclosure.

After financial firms complained that compliance would force them to cease to offer trading services to clients, the SEC adopted the current rule, which provides an alternative means for broker-dealers to comply with the Advisers Act. The broker-dealers may obtain revocable standing consent from clients to conduct trades and to provide post-trade statements disclosing the capacity in which the broker-dealer acted and that the client authorized the transaction. Broker-dealers also must provide each client with an annual report itemizing principal transactions, to comply.

This rule will sunset Dec. 31, 2010.

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