SEC helps move from fee-based accounts

The Securities and Exchange Commission yesterday voted to provide certain non-discretionary advisory accounts with limited relief from principal trading restrictions. A principal trade is an order a broker-dealer executes for its own account and at its own risk, rather than carrying out transactions for its clients. Fee-based brokerage accounts are on their way out, thanks to the overturned exemption rule, but some of their characteristics will remain in fee-based advisory accounts. Now, these firms will have to provide written notice and obtain blanket consent from these clients before relying on the rule. They must also notify investors in writing that the firm may engage in principal trading and describe possible conflicts of interest, as well as the way it will address those problems. Principal trades that do not involve a security that’s issued by the dually registered firm or a transaction in which that firm is an underwriter — aside from offerings involving investment-grade debt securities — are eligible for relief. SIFMA, the securities trade group, applauded the rule. “This decision provides important flexibility to these consumers and delivers increased consumer choice within the constraints set by the court,” said Marc Lackritz, president and CEO of SIFMA. This rule will have a 24-month sunset provision.