New Rule Proposed to Ease Asset-Based Accounts Regulation
November 15, 1999
Broker/dealers will be able to have their representatives collect asset-based fees rather than commissions without facing added regulation under a rule proposed by the SEC. If adopted, the new rule will allow registered reps to offer wrap accounts and some other products for which they receive a fee based on assets under management, without being subject to the Investment Advisers Act, the SEC said in a statement.
Under the existing rule, representatives who are paid based on assets under management must not receive compensation for providing advice. The proposed rule provides that a broker who does not have discretionary authority to trade in an asset-based account would, in most instances, be exempt from the Advisers Act, regardless of the reason for the fee.
Representatives subject to the Advisers Act must register with and pay fees either to the SEC or state securities agencies. Registration as an investment advisor also subjects advisors to added record-keeping requirements and responsibilities to clients.