Document ID: SEC-2010-1155-0001
Agency: sec
Document Type: Notice
Title: Study Regarding Obligations of Brokers, Dealers, and Investment Advisers
Posted Date: 2010-07-30T04:00Z

[Federal Register: July 30, 2010 (Volume 75, Number 146)]
[Notices]               
[Page 44996-44998]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr30jy10-86]                         

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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 rule-comments@sec.gov. 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