A senior wealth management expert, Scot MacKillop, has just run a piece in Wealth Management, arguing that the SEC has made a big mistake in the drafting of its new rule. The piece carefully employs various SEC statements to show that there is no sound logic for why the regulator created an entirely new two-tier structure for regulating brokers versus advisors. The piece makes clear the idea that if there is no fundamental difference between the service of brokers versus an advisor (something the SEC’s Clayton has said), then why should there be a regulatory difference. The SEC could have simply extended the rule from the Advisers Act of 1940 to also cover brokers.
FINSUM: It is true that simply extending the rules to brokers would have created the littlest amount of confusion amongst clients (one of the stated aims of the SEC). But at the same time, the nature of the relationship between brokers and advisors and their clients is different, so we understand the road the SEC took.