The Securities and Exchange Commission announced today that it
will not appeal the adverse decision by the U.S. Court of Appeals for
the D.C. Circuit, which on March 30 ruled against an SEC rule excepting
some broker-dealers from regulation as investment advisers. Press
Release No. 2007-95 (May 14, 2007). Most observers had expected the SEC
to seek an en banc rehearing by the full court. The SEC said it instead
would ask for a 120-day stay of the court's ruling to allow investors
and their brokers to respond. According to the SEC, the court ruling
affects an estimated one million brokerage accounts, holding an
estimated $300 billion in assets. The SEC said it will consider whether
further rulemaking or interpretations are necessary regarding the
application of the Investment Advisers Act of 1940 to these accounts and
the issues resulting from the court's decision.
SEC Chairman Christopher Cox also announced that he has approved
additional emergency funding to accelerate an on-going RAND Corporation
study of the marketing, sale, and delivery of financial products and
services to investors, allowing the study to be delivered by December
2007, several months ahead of schedule. The study is intended to provide
an empirical foundation for considering improvements in regulatory and
legislative rules in this area.
The SEC did not explain the reasons for its decision. Although
independent observers thought the SEC had a plausible case for an
appeal, en banc rehearings are rarely granted. The SEC's other option
for appeal was to petition the Supreme Court for certiorari, but this
can be done only by the Solicitor-General. It is not known whether the
SEC approached the Solicitor-General's office for a possible appeal.
The SEC press release is available online at
For my prior post on the court's decision, see
John M. Baker <JMB@...
Stradley Ronon Stevens & Young, LLP http://www.stradley.com
1220 19th Street NW, Suite 600
Washington DC 20036
FundLaw Listowner http://groups.yahoo.com/group/fundlaw