Battle Continues Over Exemption for Flat-Fee Accounts

WASHINGTON -- Reacting to sharp criticism, the head of the Securities and Exchange Commission Tuesday said the agency is weighing changes in a plan to exempt a new breed of flat-fee investment accounts from investor protection safeguards.

"We are sensitive to the concerns many of you have that these accounts have the potential to mislead investors," Chairman Arthur Levitt said at a meeting of investment professionals and regulators. "Based on your comments, we are now considering more specific disclosure requirements in the final rule."

Rather than charge per-trade commissions, the new accounts levy annual fees pegged to the value of assets. At the urging of the brokerage industry, the SEC is considering a rule that would exempt these accounts from the Investment Advisers Act of 1940, a centerpiece of the nation's securities laws. If adopted, the exemption would remove vital protections, consumer advocates warn. ...