The SEC has asked a federal appeals court for a 120-day stay of its ruling in Financial Planning Association v. SEC, in which a panel of the DC Circuit Court of Appeals vacated an SEC rule exempting brokers who receive fee-based compensation for incidental advisory services from regulation under the Investment Advisers Act. The split panel ruled that the SEC exceeded its authority and flouted six decades of consistent understanding when it broadened the existing statutory exemption for brokers. In asking for the four-month stay, the SEC also indicated that it would not appeal the panel’s ruling to either the full DC Circuit or the US Supreme Court.
According to the SEC, the stay will give investors and their brokers a chance to respond to a court decision that affects an estimated one million fee-based brokerage accounts. The Commission intends to work with individual brokerage firms during the transition period as they respond to the decision. The goal will be to provide customers of the firms with the information and time they need to determine the appropriate form of securities services for them. At the same time, the SEC will consider whether further rulemaking or interpretations are necessary regarding the application of the Advisers Act to these accounts and the issues resulting from the court’s decision