As advisors and brokers amongst you are well aware, the D.C. Court of Appeals recently hosted the regulatory equivalent of pro wrestling’s “Smack-Down”.  The result – a defeat for the SEC – was hailed by some as a “long-shot victory” and a “stunning reversal of events“.  And the SEC’s decision not to appeal a court decision put a final nail in the coffin of the controversial “Merrill Rule” just last week.  The result is a clearer delineation between brokers and financial planners, thus removing one common barrier to alpha-centric investing for many retail investors – confusion.

The rule was initially adopted by the SEC in 2005 to allow broker-dealers to offer fee-based brokerages accounts without the requisite fiduciary responsibilities faced by fee-based financial planners (although certain other requirements were mandated in the place of those fiduciary responsibilities).  Naturally, trade groups like the Financial Planners Association (FPA) cried foul, arguing in their capacity as de facto “advisors”, these broker-dealers faced a conflict of interest between their role “advising” clients and their role selling securities on a commission basis.

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