(Dow Jones) A draft financial-service reform proposal unveiled Tuesdayby Sen. Christopher Dodd (D., Conn.) won applause from financialadvisors and state regulators. ??

"The draft legislation's treatment of issues that would directly affectinvestment advisors represents a very thoughtful and knowledgeableapproach," the Investment Adviser Association said in a statement. ??

The 1,100-plus page document circulated by Dodd, chairman of the SenateBanking Committee, calls for brokers who act as investmentadvisors--meaning those who provide ongoing investment advice--toregister as investment advisers and be subject to the InvestmentAdvisers Act of 1940. This would include a fiduciary duty to act intheir clients' best interest. ??

A uniform fiduciary requirement would limit confusion and "seems likethe cleanest and best way to provide investors with a workable andcommon standard of care," Dan Barry, director of government relationsfor the Financial Planning Association, said in an email. ??

The Investment Adviser Association commended Dodd for not including anyprovisions that would extend the Financial Industry RegulatoryAuthority's oversight to investment advisers, as a bill that passed theHouse Financial Services Committee last week does. ??A Finra spokesmandeclined to comment on the Dodd proposal. ??

A self-funding mechanism for the Securities and Exchange Commissioncalled for in the Senate draft will provide more stable funding for theagency and allow it to make long-term decisions on staffing, technologyand other necessary resources, the adviser association said.

Additionally, the draft would increase the assets-under-managementthreshold for investment advisers registering with the SEC to $100million from $25 million. That's expected to shift oversight of morethan 4,000 investment advisers to states. ??State regulators welcomethe additional responsibility, Denise Voigt Crawford, president of theNorth American Securities Administrators Association and TexasSecurities Commissioner, said in a statement.

She also called Dodd's proposal "a very positive step in the rightdirection" toward boosting investor protection and confidence infinancial markets and regulators. ??Other provisions of the draft callfor investment advisors to use independent custodians to hold clientassets and allow investors to sue people who help commit securitiesfraud. ??

The Senate Banking Committee is expected to begin marking up thefinancial-service reform bill in early December, following a commentperiod. ??The full House aims to vote on its financial-service reformlegislation in early December.

House Financial Services Committee Chairman Barney Frank (D.,Mass.)said Tuesday he's confident the two chambers will be able to pass areform package soon.

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