The much anticipated RAND Report on the practices of the investment adviser and broker-dealer industries was released by the SEC on January 3, 2008. The Report was commissioned following the D.C. Court of Appeals’ decision to overturn the SEC’s 2005 fee-based brokerage rule. While the Report did not contain any ground-breaking conclusions, it is as expected, a well-researched synopsis of current business practices and investor knowledge. Chairman Christopher Cox said the SEC is anxious to review the Report to “assist the Commission’s efforts to update [its] regulations to improve investor protections in today’s new marketplace.”
Among the findings of the Report are: (1) distinctions between services provided by investment advisers and broker-dealers are eroding; (2) both industries are “composed of heterogeneous firms engaged in a variety of relationships with their clients and with other firms”; (3) individual investors given the disclosure documents reviewed by the Report “would likely be left to turn to individual professionals to summarize the key aspects of the prospective relationship”; (4) many investors do not understand key distinctions between investment advisers and broker-dealers duties, titles used, firms worked for or services offered; (5) most investor participants expressed satisfaction with their financial service provider, often arising from the personal attention received; and (6) many investors are uncertain/ confused about fees they pay.