The Senate Banking Committee's financial services reform bill that was introduced Monday included some provisions that could impact financial advisors, including the deletion of a provision that would have applied the fiduciary standard of care to the broker-dealer world.

The draft bill introduced by Sen. Christopher Dodd (D-Conn.) would also raise the asset threshold separating state- and SEC-registered advisors from $25 million to $100 million. If enacted, this would shift more than 4,000 SEC-registered investment advisors to the states.

Broadly speaking, the proposed Senate legislation would ratchet up the scrutiny on big Wall Street banks by curtailing profits, requiring more capital and putting curbs on executive pay. It would also create an entity within the Federal Reserve Board to be responsible for consumer financial protection in such areas as credit cards and mortgages

The controversial bill's passage is far from certain, given opposition from Republicans and from the big Wall Street firms.

Regarding the fiduciary standard of care, Dodd's original draft bill in November included a provision that would have excised the broker-dealer exclusion under the Investment Advisers Act of 1940 that exempts brokers from registering as advisors so long as the advice they give clients is incidental to selling products.

Instead, the bill that was adopted by Dodd's committee will propose that a study be conducted by the SEC to determine the feasibility of holding broker-dealers to the same fiduciary standard that governs RIAs. The provision for the study was proposed by Sens. Tim Johnson (D-S.D.) and Michael Crapo (R-Ida.).

That disappoints investor groups who vigorously lobbied Congress to maintain the language of the earlier draft. 

"While we favored Dodd's first approach, there are many steps in this process," says David Tittsworth, executive director of the Investment Advisers Association. "We'll continue advocating for not weakening the fiduciary standard of care that all advisors owe to their clients, and we'll continue advocating what was in the [Obama] administration's plan last summer to extend the Investment Advisers Act's fiduciary standard of care to broker-dealers and others who provide investment advice."

On the flip side of the issue, others saw yesterday's proposed legislation as good news. "As the delivery of financial advice, products and services has evolved in the seven decades since Congress first passed laws governing securities sales and investment advice, the regulatory lines have blurred and are not sufficient to protect investors," Dale Brown, President & CEO of the Financial Services Institute (FSI), said in a statement. "The SEC study will provide valuable insight because there is no clear consensus in the current debate on the best way to redraw the lines."

FSI is a trade group representing independent broker-dealers.

Among the other provisions in the Senate reform bill is a measure to make the SEC a self-funding organization through fees it collects. That would give the SEC a dedicated revenue stream and avoid the annual appropriation process before Congress.

"This would provide the SEC with the resources it needs to do its job," Tittsworth says.

Tittsworth's group also favored raising the asset threshold separating state- and SEC-registered advisors from $25 million, though he says they were agnostic about any proposed upper threshold limit.

"There are legitimate questions whether the states can handle that increased workload," he says.