Proposed Extension of Temporary Rule Regarding Principal Trades with Advisory Clients; Proposed Rule (SEC - Pre-Fed. Reg. Version) (with Lofchie Comment)

The SEC is proposing to extend the effectiveness of Rule 206(3)-3T under the Advisers Act, a temporary rule that establishes an alternative means for investment advisers that are registered with the SEC as broker-dealers to meet the requirements of Section 206(3) of the Advisers Act when they act in a principal capacity in transactions with certain of their advisory clients. The amendment would extend the date on which rule 206(3)-3T will sunset from December 31, 2012 to December 31, 2014. During that extended period, the SEC intends to study, among other things, the standard of care (fiduciary obligations?) which broker-dealers owe to their customers.

Comments Due: Comments must be received on or before [30 days after the date of publication in the Federal Register].

Cross-Reference(s): Dodd-Frank Section 913 (Study and rulemaking regarding obligations of brokers, dealers, and investment advisers); Related Dodd-Frank Study: Study on Investment Advisers and Broker-Dealers.

Lofchie Comment: Firms should be aware that this is a rule proposal, not an automatic extension. Accordingly, those firms which rely on the rule should review the release carefully and consider responding to the list of questions as to whether the rule should be extended an additional two years.

View rule release here (links externally to SEC website).