The Securities and Exchange Commission decided today to continue to allow broker-dealers to provide fee-based services, pending the adoption of permanent rules.
   SEC Chairman William Donaldson said the commission will adopt permanent rules that will clarify the conditions under which fee-based brokers can operate outside the Advisers Act.
   "We propose to clarify the obligation of a broker-dealer to comply with the Advisers Act when the broker-dealer exercises investment discretion with respect to an account, and when the broker-dealer performs certain financial planning and other services," Donaldson said.
   It was unclear whether the action by the SEC will be enough to satisfy groups such as the Financial Planning Association, which has sued the SEC because of its objections to the broker-dealer exemption rule. The FPA also protested the fact that the exemption has never been formally approved by the SEC, but instead been put into practice as a "no-action" rule. After the lawsuit was filed, the SEC promised to address the issue by the end of this year.
   The FPA, as well as other advisor and consumer groups, have argued the exemption obscures the difference between investment advisors and brokers, leading to commission-driven agents presenting themselves as RIAs.
   "This represents some progress, but the SEC still has a long way to go," said Duane Thompson, the FPA's advocacy group director.
   Thompson says the issue will become clearer in the spring, when the SEC is expected to clarify its definition of advisory service that is "solely incidental" to brokerage activity-namely, the type of investment advice that will allow brokers to remain free of Advisers Act regulations.
   "We're hopeful at a minimum that they will really wrestle with this problem of what is incidental and what it is not," Thompson said. "It's such a messy, messy area we're worried that it's going to leave room for mischief by a creative securities lawyer."