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This Web site contains a compilation of more than a thousand consumer finance  columns written by Tony Novak from the 1980s through 2006, updated and reformatted for maximum usefulness today.  New material was added after 2010.

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Financial planners sue the SEC

originally posted: 11/22/2006  reposted: 2/18/2011 This post has not been recently reviewed or revised by the author and may be out of date. If you notice an error or are in doubt, please send a new question by email or ask for an update. Email

Q: Why are financial planners suing the Securities Exchange Commission?

A: The Financial Planning Association (FPA) that represents a large portion of independent financial planners and Registered Investment Advisers has brought a court challenge to the Securities Exchange Commission (SEC) for a new rule that allows investment brokers to avoid disclosing their conflict of interest with the interests of investing clients. The Court hearing the case recently set a schedule for the filing of positions by each side. Normally a financial adviser must uphold the best interests of the client. This is called a "fiduciary duty". But investment brokers who use some term like "adviser" "financial consultant" are allowed to put the interests of their employer before the interest of the individual investor without disclosing this to the investor. Independent advisers are upset with the rule because they feel that it gives the brokers a business advantage and exempts them from the provisions of the two Registered Investment Advisers Acts. A number of consumer groups have joined with the FPA in challenging the SEC on this issue that has become known as the "level playing field" issue within the financial industry. While this case appears to be one-sided, the SEC is likely to argue that investment brokers are already subject to enough regulations and should be allowed to provide "advice" to their clients without disclosing the nitty-gritty details of their business and compensation. This issue is being covered by where a number of financial advisers on both sides weigh in on the issue in the online forums. (Tony Novak is a volunteer moderator of these discussion forums).


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