SEC Proposing to Extend Principal Trading Rule

Adviser attorney NYCThe SEC has proposed to extend the sunset for the temporary principal trading rule under the Advisers Act by another two years to December 31, 2014.

Temporary rule 206(3)-3T, originally adopted in 2007, allows investment advisors that are dually registered as broker-dealers to sell stocks and bonds from their firm’s product inventory without making prior disclosure and getting prior written consent for each trade.  Instead, they can provide disclosures on a prospective or annual basis and get oral consents.

The SEC indicated that another extension is necessary while the big-picture question of a uniform fiduciary standard for broker-dealers and investment advisers is being pondered.

“We believe the requirements of [the principal-trading rule], coupled with regulatory oversight, will adequately protect advisory clients for an additional limited period of time while we consider more broadly the regulatory requirements applicable to broker-dealers and investment advisers,” the SEC proposal states.

Apparently, fiduciary advocates are up in arms about the extension.  I would be very interested to know from you whether the latest extension has significant practical implications for you.

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