", we are convinced that it is nonetheless contrary to the public interest and will harm consumers by formalizing two different levels of consumer protection for the same advisory services."

Still murky

Compliance specialist Geoff Bobroff of East Greenwich, R.I.-based Bobroff Consulting thinks the FPA might have a point. "The SEC is in what I'd call a gray area here - and they haven't done much to clear things up with their latest ruling," he says.

The point of contention for the FPA, says Bobroff, is that brokers don't have to disclose potential conflicts of interest to the degree required of 1940 Act advisors. But he notes that there are separate compliance regulations around certain third-party and proprietary investment products. Other products, such as separately managed accounts, might be viewed as covered for disclosure purposes under investment advisory agreements.

Under last month's SEC ruling, brokers "providing non-discretionary advice that is solely incidental to its brokerage services is excepted from the Invest Advisers Act regardless of whether it charges an asset-based or fixed fee" as opposed to commissions.

Keep looking

Some independent advisors had urged the SEC to overturn its 1999 "Merrill rule" exempting fee-based brokers from having to register as financial advisors on the grounds that their advice to clients is "incidental" to the brokerage services they provide. Generally speaking, independent advisors want brokers, especially wirehouse brokers" held to the same fiduciary standards they themselves have to follow under the 1940 Act.

In the event, however, the SEC only tweaked the disclosure requirements for brokerage advisors who hold themselves out as consultants. Under the new ruling, brokers have to give clients a disclaimer that explicitly says the account in question is "a brokerage account, not an advisory account."