FPA sues the SEC over "merrill" rule

After years of debate, the Financial Planning Association has sued the Securities & Exchange Commission to block the "Merrill Lynch" rule. Proposed in 1999 but never adopted, the rule extends broker/dealers' exemption from the 1940 Investment Advisers Act to fee-based brokerage accounts. Critics maintain that by not challenging firms following the rule, the SEC allowed it to become a standard. They maintain the rule lets brokers evade fiduciary responsibilities by specifying that any advice offered in a fee-based account is incidental. Those calling themselves planners, says FPA President Elizabeth Jetton, "should be subject to appropriate standards." But securities lawyer Lawrence Cohen says the suit may prompt the SEC to adopt the rule. "The FPA might get the answer it doesn't want," he warns.–William Glasgall