One of the nation's largest brokerage firms has come out against the SEC's "Merrill Lynch Rule," armed with a survey that indicates the rule confuses investors.

   TD Waterhouse USA, which has submitted comments to the SEC in opposition to the 5-year-old rule, claims its survey backs up the argument that the rule is failing to protect investors.

   The survey found that 58% of respondents incorrectly believe that both stockbrokers and investment advisors have a fiduciary responsibility to act in the investor's best interest in all aspects of the financial relationship, according to TD Waterhouse.

   The survey also found that 63% of respondents incorrectly believe both stockbrokers and investment advisors are required to disclose all conflicts of interest prior to providing financial advice, according to the company.

   The "Merrill Lynch Rule" refers to a 1999 proposal by the SEC to exempt fee-based brokers from being subject to the regulations under the Investment Advisers Act of 1940.

   The SEC has never officially approved the exemption, but its provisions have essentially been in force the past five years-over the objection of investment advisor and consumer groups.

   The Financial Planning Association filed a lawsuit to press the SEC into action earlier this year, after which the SEC promised to take public comments on the matter and make a final decision by year's end.

   Opponents say fee-based brokers and advisors should be competing on a level playing field in terms of their regulatory and fiduciary responsibilities.

   "We recommend a common industry standard that provides investors uniform protection around fee-based financial advice," says Tim Pinnington, president and CEO of TD Waterhouse USA.

   A spokesman for the Securities Industry Association (SIA) contends the survey "clouds the issue" and that the exemption rule has helped investors by allowing more brokers to offer fee-based accounts.

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