WASHINGTON -- More than 90 percent of U.S. investors say stockbrokers who dispense financial advice should be subject to the same investor protection rules as investment advisers, according to a survey released on Thursday by two groups.
The findings of the survey, released by the Consumer Federation of America and the advisory consortium Zero Alpha Group, relate to an appeals court ruling last month that struck down an SEC rule exempting some broker dealers who give investment advice from strict disclosure requirements.
The two groups said the results show the need for the SEC to adopt stricter investor protection rules and require stockbrokers to be more forthright about their services.
The survey of 1,073 adult investors found fewer than one-third understood that brokers' primary service is buying and selling securities, not investment advice.
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"The SEC has overestimated what investors know and understand," Steve Lugar, managing director of BHCO Capital Management in Dallas and a member of the Zero Alpha Group, told reporters.
An SEC spokesman said no decision has been made on whether the agency will challenge the appeals court's ruling.
The SEC rule that was adopted in 2005 and recently struck down allowed some brokers to offer fee-based accounts without having to register as financial advisers. They were exempt as long as the investment advice was "solely incidental" to brokerage services provided on a customer's account and if specific disclosure was made to the customer.
The broker could, however, still receive compensation for investment advice.
The appeals court found that the SEC overstepped its authority with the rule.
The survey also found that more than half of investors polled would be much less or somewhat less likely to use a stockbroker providing investment advice if the broker is subject to weaker investor protection rules than a financial planner.
Some 86 percent of respondents said a stockbroker should be required to disclose any incentives or forms of compensation received in connection with an investment product.
Barbara Roper, director of investment protection for the Consumer Federation of America, said the line or two of disclosure now required by the SEC is not enough to protect investors from stockbrokers, whose job is to sell products.
"This is an area where the policy quite simply makes no sense," Roper said.
The survey was conducted by the Opinion Research Corp. from April 12-16.
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