Geoff Chalmers, Esq.

As we previously reported, the U.S. Supreme court overturned the SEC's rule permitting brokerage firms to offer fee based accounts without having to register as advisers. On May 21 the SEC issued a 120 day stay of implementation  If the Supreme Court ruling stands, firms offering fee based  accounts will have to convert them to another compensation arrangement -- or register as investment advisors.     Firms contemplating what to do should consider that if they convert to an investment advisor their reps will take on a "fiduciary" level of responsibiity to their clients. This willl no doubt add to heightened liability exposure and increased compliance responsibilities. The alternative is to get the clients to agree to change to a fee structure where the fee is being provided for investment management services by a third party advisor, whether affiliated or not. The account would then generate commissions and clearing and execution charges for the broker dealer.      Broker dealers should continue to monitor the situation closely, particularly as to whether congressional action is possible before September.