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Securities Regulation Keyed to Coffee
Financial Planning Association v. Securities and Exchange Commission
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- Topic: Identifies the topic of law and where this case fits within your course outline.
- Parties: Identifies the cast of characters involved in the case.
- Procedural Posture & History: Shares the case history with how lower courts have ruled on the matter.
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- Brief Facts: A Synopsis of the Facts of the case.
- Rule of Law: Identifies the Legal Principle the Court used in deciding the case.
- Facts: What are the factual circumstances that gave rise to the civil or criminal case? What is the relationship of the Parties that are involved in the case. Review the Facts of this case here:
The SEC propagated a final rule that excused broker-dealers from the IAA when they get “special compensation” for specific investment guidance. As stated explicitly in the final rule, usually, on “fee based programs”, that a broker-dealer who (1) gets special compensation will not be considered an investment adviser if (2) any advice given is only supplementary to brokerage services offered on a customer’s account and (3) explicitdisclosure is given to the customer. On discount brokerage programs, a broker-dealer will not be thought to have gotten special compensation simply due to chargingcustomers varying prices for brokerage services.The rule mentions three none-exclusive conditions where advisory services, for which special compensation is accepted under a fee-based program, would not be implemented “solely incidental to” brokerage: when (1) a single fee or agreement is present for advice; (2) a customer accepts particular financial planning services; and, (3) a broker-dealer usually has investment discretion over a client's account. Brokers and dealers are not accountable to the obligations stated under IAA § 202(a)(11)(C) where their investment advice is (1) “solely incidental to the conduct of [their] business as a broker or dealer”, and (2) the broker or dealer “receives no special compensation therefor”. Those investment advisers who are accountable to the IAA are obligated to register and keep records; to regulate the category of agreements they enter; and not participate in specific types of dishonest and fraudulent dealings. The Financial Planning Association (FPA), a group of financial advisers accountable to the IAA, appealed the final rule, arguing that the SEC had surpassed its right in endorsing it. The FPA argued that when Congress passed the IAA, Congress distinguished in subsection (C) the group of broker-dealers it proposed to excuse, and in that exception in subsection (F) for “such other persons not within intent of this paragraph” was only proposed to permit the SEC to excuse new groups from the IAA, not to enlarge the groups that Congress explicitly mentioned. The court of appeals granted review.
- Issue(s): Lists the Questions of Law that are raised by the Facts of the case.
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- Policy: Identifies the Policy if any that has been established by the case.
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