[Federal Register Volume 75, Number 146 (Friday, July 30, 2010)]
[Notices]
[Pages 44996-44998]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-18753]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-62577; IA-3058; File No. 4-606]
Study Regarding Obligations of Brokers, Dealers, and Investment
Advisers
AGENCY: Securities and Exchange Commission.
ACTION: Request for comment.
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SUMMARY: The Securities and Exchange Commission is requesting public
comment for a study to evaluate: The effectiveness of existing legal or
regulatory standards of care for brokers, dealers, investment advisers,
and persons associated with them when providing personalized investment
advice and recommendations about securities to retail investors; and
whether there are gaps, shortcomings, or overlaps in legal or
regulatory standards in the protection of retail customers relating to
the standards of care for these intermediaries.
DATES: The Commission will accept comments regarding issues related to
the study on or before August 30, 2010.
ADDRESSES: Comments may be submitted by any of the following methods:
Electronic Comments
Use the Commission's Internet comment form (http://www.sec.gov/rules/other.shtml); or
Send an e-mail to [email protected]. Please include
File Number 4-606 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090. All submissions should refer to File Number
4-606. This file number should be included on the subject line if e-
mail is used. To help us process and review your comments more
efficiently, please use only one method. The Commission will post all
comments on the Commission's Internet Web site (http://www.sec.gov).
Comments are also available for Web site viewing and printing in the
Commission's Public Reference Room, 100 F Street, NE., Washington, DC
20549, on official business days between the hours of 10 a.m. and 3
p.m. All comments received will be posted without change; we do not
edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly.
FOR FURTHER INFORMATION CONTACT: Holly Hunter-Ceci, Division of
Investment Management, at (202) 551-6825 or Emily Russell, Division of
Trading and Markets, at (202) 551-5550, Securities and Exchange
Commission, 100 F Street, NE., Washington, DC 20549-7010.
Discussion
On July 21, 2010, President Obama signed the Dodd-Frank Wall Street
Reform and Consumer Protection Act of 2010. Under section 913 of that
Act, the Commission is required to conduct a study regarding the
obligations of brokers, dealers, and investment advisers.
The study will evaluate the effectiveness of existing legal or
regulatory standards of care for brokers, dealers, investment advisers,
persons associated with brokers or dealers, and persons associated with
investment advisers for providing personalized investment advice and
recommendations about securities to retail customers imposed by the
Commission and a national securities association, and other Federal and
State legal or regulatory standards. In addition, the study will
evaluate whether there are legal or regulatory gaps, shortcomings, or
overlaps in legal or regulatory standards in the protection of retail
customers relating to the standards of care for brokers, dealers,
investment advisers, persons associated with brokers or dealers, and
persons associated with investment advisers for providing personalized
investment advice about securities to retail customers that should be
addressed by rule or statute.
For purposes of the study, the term ``retail customer'' means a
natural person (or the legal representative of such natural person) who
receives personalized investment advice about securities from a broker
or dealer or investment adviser and uses such advice primarily for
personal, family, or household purposes.
The Commission is required to submit a study report to the
Committee on Banking, Housing, and Urban Affairs of the Senate and the
Committee on Financial Services of the House of Representatives no
later than 6 months after enactment of the Dodd-Frank Act.
[[Page 44997]]
In order to prepare the study report, the Commission is required to
seek and consider public input, comments, and data.
Accordingly, we request comment on the following:
(1) The effectiveness of existing legal or regulatory standards of
care for brokers, dealers, investment advisers, persons associated with
brokers or dealers, and persons associated with investment advisers for
providing personalized investment advice and recommendations about
securities to retail customers imposed by the Commission and a national
securities association, and other Federal and State legal or regulatory
standards;
(2) Whether there are legal or regulatory gaps, shortcomings, or
overlaps in legal or regulatory standards in the protection of retail
customers relating to the standards of care for brokers, dealers,
investment advisers, persons associated with brokers or dealers, and
persons associated with investment advisers for providing personalized
investment advice about securities to retail customers that should be
addressed by rule or statute;
(3) Whether retail customers understand that there are different
standards of care applicable to brokers, dealers, investment advisers,
persons associated with brokers or dealers, and persons associated with
investment advisers in the provision of personalized investment advice
about securities to retail customers;
(4) Whether the existence of different standards of care applicable
to brokers, dealers, investment advisers, persons associated with
brokers or dealers, and persons associated with investment advisers is
a source of confusion for retail customers regarding the quality of
personalized investment advice that retail customers receive;
(5) The regulatory, examination, and enforcement resources devoted
to, and activities of, the Commission, the States, and a national
securities association to enforce the standards of care for brokers,
dealers, investment advisers, persons associated with brokers or
dealers, and persons associated with investment advisers when providing
personalized investment advice and recommendations about securities to
retail customers, including--
(A) The effectiveness of the examinations of brokers, dealers, and
investment advisers in determining compliance with regulations;
(B) The frequency of the examinations; and
(C) The length of time of the examinations;
(6) The substantive differences in the regulation of brokers,
dealers, and investment advisers, when providing personalized
investment advice and recommendations about securities to retail
customers;
(7) The specific instances related to the provision of personalized
investment advice about securities in which--
(A) The regulation and oversight of investment advisers provide
greater protection to retail customers than the regulation and
oversight of brokers and dealers; and
(B) The regulation and oversight of brokers and dealers provide
greater protection to retail customers than the regulation and
oversight of investment advisers;
(8) The existing legal or regulatory standards of State securities
regulators and other regulators intended to protect retail customers;
(9) The potential impact on retail customers, including the
potential impact on access of retail customers to the range of products
and services offered by brokers and dealers, of imposing upon brokers,
dealers, and persons associated with brokers or dealers--
(A) The standard of care applied under the Investment Advisers Act
of 1940 for providing personalized investment advice about securities
to retail customers of investment advisers, as interpreted by the
Commission and the courts; and
(B) Other requirements of the Investment Advisers Act of 1940;
(10) The potential impact of eliminating the broker and dealer
exclusion from the definition of ``investment adviser'' under section
202(a)(11)(C) of the Investment Advisers Act of 1940, in terms of--
(A) The impact and potential benefits and harm to retail customers
that could result from such a change, including any potential impact on
access to personalized investment advice and recommendations about
securities to retail customers or the availability of such advice and
recommendations;
(B) The number of additional entities and individuals that would be
required to register under, or become subject to, the Investment
Advisers Act of 1940, and the additional requirements to which brokers,
dealers, and persons associated with brokers and dealers would become
subject, including--
(i) Any potential additional associated person licensing,
registration, and examination requirements; and
(ii) The additional costs, if any, to the additional entities and
individuals; and
(C) The impact on Commission and State resources to--
(i) Conduct examinations of registered investment advisers and the
representatives of registered investment advisers, including the impact
on the examination cycle; and
(ii) Enforce the standard of care and other applicable requirements
imposed under the Investment Advisers Act of 1940;
(11) The varying level of services provided by brokers, dealers,
investment advisers, persons associated with brokers or dealers, and
persons associated with investment advisers to retail customers and the
varying scope and terms of retail customer relationships of brokers,
dealers, investment advisers, persons associated with brokers or
dealers, and persons associated with investment advisers with such
retail customers;
(12) The potential impact upon retail customers that could result
from potential changes in the regulatory requirements or legal
standards of care affecting brokers, dealers, investment advisers,
persons associated with brokers or dealers, and persons associated with
investment advisers relating to their obligations to retail customers
regarding the provision of investment advice, including any potential
impact on--
(A) Protection from fraud;
(B) Access to personalized investment advice, and recommendations
about securities to retail customers; or
(C) The availability of such advice and recommendations;
(13) The potential additional costs and expenses to--
(A) Retail customers regarding, and the potential impact on the
profitability of, their investment decisions; and
(B) Brokers, dealers, and investment advisers resulting from
potential changes in the regulatory requirements or legal standards
affecting brokers, dealers, investment advisers, persons associated
with brokers or dealers, and persons associated with investment
advisers relating to their obligations, including duty of care, to
retail customers; and
(14) Any other considerations commenters would like to comment on
to assist the Commission in determining whether to conduct a
rulemaking, following the study, to address the legal or regulatory
standards of care for brokers, dealers, investment advisers, persons
associated with brokers or dealers, and persons associated with
investment advisers for providing personalized investment advice and
recommendations about securities to retail customers.
[[Page 44998]]
By the Commission.
Dated: July 27, 2010.
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2010-18753 Filed 7-29-10; 8:45 am]
BILLING CODE 8010-01-P