The Financial Planning Association is considering a lawsuit against the SEC as a new strategy in its long-running opposition to the agency's proposed broker-dealer exemption rule.

"It's a possibility, but frankly it's not the first thing on our plate," FPA President Elizabeth Jetton said of the chances that the FPA would file suit against the SEC. "We would like nothing more than to get results" another way."

When pressed further, however, Jetton indicated a lawsuit is a strong possibility if the SEC doesn't move on the issue. "If it can be avoided, weíd like to avoid it," she said. When asked what it would take to avoid a lawsuit, she responded, "A pretty dramatic alteration or removal of the ruling."

Although there have been whispers about legal action in the past, this is the first time an FPA official has openly declared that the organization considers a lawsuit one of its options. The FPA actually brought up the idea of a lawsuit itself in a survey of its membership that was released in April. Also, former SEC Chairman Arthur Levitt, who initially proposed the rule in 1999, indicated he had changed his mind and now opposed it during a speech he have in February.

In its survey, the FPA asked members how the organization should proceed on the matter. In response, 83.1% said they would rather file a lawsuit against the SEC than agree to a compromise ruling that "is not consistent with the fiduciary and disclosure standards of the Advisers Act."

The specific results had 55.3% supportive of the FPA taking a lead on the issue by "suing the SEC based on misinterpretation of the Advisers Act and related issues involved in the rulemaking process." Another 27.8% said the FPA should sue as part of a group, instead of taking the lead itself. Only 3.4% said the FPA should drop its opposition to the exemption, and 7% said they had no opinion.

Most respondents, 76.7%, said they oppose the rule because it represents an unfair business advantage and would reduce investors' protection-the same reasons the FPA says it's opposed.

The rule in question was proposed by the SEC in 1999, and would expand the broker-dealer exemption to the Investment Advisers Act of 1940 under certain conditions:

The advice is provided on a nondiscretionary basis.
The advice is solely incidental to the brokerage services.
The broker-dealer prominently discloses to its customers that their fee-based accounts are brokerage accounts.

There has been no action on the rule since it was proposed, although it has been the subject of intense lobbying since that time. SEC spokesman John Heine had no comment on the FPAís consideration of a lawsuit. He says the rule is "still pending" and that there is no indication of when the SEC will take action. "I don't know that it's ever reasonable to expect a specific date in these situations," he says. "It's hard to tell when the commission might act on any given rule proposal."