The Financial Planning Association is still mulling what action to take on its lawsuit against the Securities and Exchange Commission and its handling of the broker-dealer exemption rule.

   After six years of debate and litigation, the SEC unanimously decided earlier this month to formally allow brokers to offer fee-based advisory accounts without being regulated as advisors under the Advisers Act of 1940.

   The SEC released the full 117-page ruling on Tuesday, and FPA officials say they are still reviewing the documents to decided if they will press on with their lawsuit.

   The FPA, along with consumer groups and other organizations, has fought against the exemption, arguing it would allow brokers to dole out investment advice without having to adhere to important fiduciary standards mandated by the Advisers Act.

   In its initial response, the FPA commended the SEC for enhancing the disclosure requirements for brokerage customers, including a requirement that fee-based brokers disclose that their interest may not always be the same as those of their customer.

   The FPA also praised the SEC's decision to launch a 90-day study to identify the issues of investor protection raised by the rule proposal.

   But a lawsuit filed by the FPA in February to force an SEC decision on the issue remains active. At press time, FPA officials said they were still reviewing the full ruling and no decision had been reached on how to proceed with the lawsuit.
The FPA was expected to reach a decision by April 29-the date by which parties to the lawsuit have been asked to file any further petitions.

   "We need to look at the rule itself, and see whether or not our board believes it satisfies the concerns we expressed when the lawsuit was originally filed," says Duane Thompson, the FPA's advocacy group director.

   The brokerage industry applauded the move, after having argued that putting fee-based broker accounts under the auspices of both the Advisers Act and the Securities Exchange Act of 1934 would dissuade many broker-dealers from offering fee-based services.

   "Placing broker-dealers that offer fee-based brokerage accounts to their clients under an additional, and wholly unnecessary, layer or regulation could have severely limited the availability of these popular accounts," Marc E. Lackritz, president of the Securities Industry Association, said in a statement.

   The ruling allows brokers to offer fee-based accounts outside the requirements of the Advisers Act as long as they meet certain requirements, including the stipulation that they provide investment advice that is "solely incidental" to their brokerage services.

   The SEC went on to explain that "solely incidental" does not include exercising investment discretion or situations where "the broker or dealer charges a separate fee or separately contracts for advisory services."

   The SEC also modified its original ruling in 1999 by expanding the disclosure requirements for exempt broker-dealers. The rule states that all advertisements, contracts and other documents related to fee-based brokerage accounts contain "a prominent statement that the account is a brokerage account and not an advisory account."

   The disclosure would also have to explain that, as a result, the interests of the client and the broker-dealer may not always be the same.