However, this may lead the Commission into a quagmire. The Release raises a number of questions in this vein, which illustrate the difficulty of drawing such distinctions and suggest just how unsatisfying this approach would be in terms of affording predictable regulatory outcomes. This would leave broker-dealers to wrestle with these questions on their own, with enforcement action a distinct possibility if they reach an incorrect conclusion. It does not appear to us that either alternative would be particularly helpful to brokers who offer these programs. Consequently, we would expect cautious brokers to continue to register and comply with both Acts.
Compensation can serve as a bright line insofar as it measures the service provided.
Discretion may also serve as a bright line, but technology will render discretion irrelevant for an ever increasing share of investment activity. So long as this remains the effective criterion for determining whether brokers must also register as advisers, cautious brokers will continue to register under and comply with the Advisers Act. Federated very much appreciates having the opportunity to comment on these important Proposals. Footnotes 1 Federated is one of the largest asset management firms in the United States. While this situation could theoretical exist for a commission based account, the first broker would have an economic incentive to restrict access to its investment advice to clients that also traded through the broker.