The Securities and Exchange Commission will drop its fight against a court decision putting more restrictions on Wall Street brokers who oversee $300 billion in clients' cash.

Earlier this spring, a federal appeals court ruled that the SEC had overstepped its authority in updating rules governing the brokers, siding with the Financial Planning Association, which sued the SEC over its original 1999 proposal -- which was never actually adopted. The association argued that the rule, which would have allowed brokers to offer some fee-based services without abiding by tougher customer-protection requirements other investment advisors have to follow, violated distinctions Congress intended to apply to brokers and investment advisers.

The SEC said that it will still ask the courts to stay the ruling for 120 days to give investors and brokers time to respond. The agency also said it would consider whether it needed to adopt new rules regarding fee-based accounts.

In the years since the 1999 proposal, the SEC has adopted a rule clarifying when brokers were allowed to offer fee-based accounts to brokerage customers, and also seen the rejections of a rule requiring federal registration of hedge-fund advisors and a rule mandating that mutual-fund boards have independent chairmen.


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