Proposed SEC Rule on Brokers Makes No Sense

Complaints against brokers reached an all-time high in 2000. Never slow to address problems in the industry, the Securities and Exchange Commission recently announced plans to adopt a long-dormant rule that would provide less regulation for brokers.

Earlier this month, Paul Roye, head of the SEC division that oversees investment advisers, announced that his staff would recommend that the agency adopt a rule exempting brokers from rules that apply to investment advisers -- regardless of whether they are providing investment advice.

One Good Turn

The rule is the result of a misguided quid pro quo. The story began in 1999, when Merrill Lynch announced a new program, Unlimited Advantage, that would charge a percentage of assets for investment advice and unlimited trading. ...