Supreme Court nominee Merrick Garland issued a dissent in the 2007 ruling that struck down the so-called "Merrill Lynch rule," one of the most important judicial decisions to affect the financial advice industry.
The Financial Planning Association sued the Securities and Exchange Commission in 2005 because the rule permitted brokers to accept fees for their investment advice without requiring them to adhere to a fiduciary standard. That meant they weren't required to act in the best interests of their clients, setting them apart from investment advisers who were registered with the SEC.
“The FPA felt it was not a level playing field and it also reduced investor protection by having two different standards of conduct for providing the same service,” said Duane Thompson, who was head of the FPA's Washington office at the time the lawsuit was brought.
The 63-year-old Mr. Garland, who was nominated Wednesday by President Barack Obama to fill the vacancy created by the death of Supreme Court Justice Antonin Scalia, cast the sole dissenting vote in a 2-1 decision by the U.S. Court of Appeals for the District of Columbia Circuit in Washington.
Mr. Garland's dissent was not a view on whether brokers should be considered fiduciaries, but whether the SEC had the authority to make the ruling, which was an exemption from the Investment Advisers Act of 1940, according to Robert Plaze, a Washington-based partner with Stroock & Stroock & Lavan. He thought the SEC did have that authority, said Mr. Plaze.