WASHINGTON, D.C.///May 15, 2007///Citing its April 2007 survey with the Consumer Federation of America (CFA), the Zero Alpha Group (ZAG) today announced its strong support for the decision by the U.S. Securities and Exchange Commission (SEC) against appealing a March federal court ruling overturning the Commission's controversial "broker dealer rule." The Zero Alpha Group is an influential international network of independent investment advisory firms that manage a total of more than $7 billion in assets.

The SEC had until Monday (May 14, 2007) to appeal the decision and elected not to do so.

On April 26, 2007, ZAG and CFA released a national survey of investors showing that (1) more than nine out of 10 U.S. investors (91 percent) think that stockbrokers and financial planners who provide investment advice services should be subject to the same investor protection rules and (2) the SEC's nearly two-year effort to heighten disclosure that fee-based brokerage accounts are not advisory accounts does not appear to be working.

According to the Opinion Research Corporation (ORC) national opinion survey released by the Zero Alpha Group and the Consumer Federation of America, fewer than one out of three U.S. investors (30 percent in 2007) correctly understand that the "primary service" provided by stockbrokers is the buying and selling of stocks, mutual funds, bonds, etc., not investment advice. This is virtually unchanged from the 26 percent of U.S. investors who responded in the same manner when this same question was posed in a 2004 ZAG/CFA survey.

Steve Lugar, managing director, BHCO Capital Management, Dallas, TX., said: "The SEC is giving the public what it clearly wants: a consistent approach to regulation of stockbrokers and investment advisers who are doing the same thing. That's a common-sense approach and it also is reflected in the vast majority of investors wanting to know when stockbrokers who are providing investment advice are getting special inducements to push their clients in the direction of certain products."

Gregory Carlson, founding principal, Carlson Capital Management (CCM), Northfield and Hastings, MN., said: "This is a triumph of even-handed regulation. Most U.S. investors think that stockbrokers and financial planners who provide investment advice should be governed by equally stringent investor protection rules. The latest Zero Alpha Group/Consumer Federation of America survey confirms the wisdom of the SEC in not appealing the federal court decision overturning its widely criticized and ineffective 'broker dealer rule.'"

Scott Sarber, vice president, Petersen Hastings Investment Management (PHIM), Kennewick, WA., said: "The 2004 and 2007 ZAG/CFA surveys provide before-and-after 'snapshots' of investor awareness, which does not appear to reflect any real improvement after two years of the enhanced disclosure required by the SEC. The picture that emerges from this data is not pretty when it comes to making sure that American investors understand who they are dealing with and on what terms. Now, the SEC is in a position to start undoing some of the damage inflicted in recent years."

The Securities and Exchange Commission has for many years permitted stockbrokers to offer extensive investment advice services without regulating them under the stricter standards that apply to other investment advisers. The so-called "broker dealer" rule recently rejected by the courts expanded that loophole by permitting brokers to charge for that investment advice and still escape regulation as advisers. As part of that rule, the SEC in May 2005 required new and supposedly tougher disclosure on fee-based brokerage accounts to alert investors to the fact that these accounts are not advisory accounts and may be subject to conflicts of interests.

For years, the SEC used method of compensation to draw the regulatory dividing line between brokers and advisers, relying on the fact that advisers traditionally charged fees for their services, while brokers charged commissions. The Commission's broker dealer rule was developed in 1999 in response to the advent of fee-based brokerage accounts. The rule exempted the brokerage fee-based accounts from regulation under the Investment Advisers Act, so long as the broker disclosed that the account was a brokerage account, did not have discretionary authority over the account, and gave only advice that is "solely incidental" to the broker's primary business of buying and selling securities. Unfortunately, when the SEC first proposed the rule, it had never defined or enforced the "solely incidental" standard.

When the agency finalized the so-called "broker dealer" rule in 2005, it defined all discretionary accounts as advisory accounts (not just those that are fee-based), it defined financial planning as an investment advisory service, and it strengthened the disclosure required on fee-based accounts. The final rule release also included a staff interpretation of the solely incidental to practice exemption. Unfortunately, the staff interpretation of the solely incidental to language was so broad virtually any financial services activity would qualify. Also, the staff quickly developed an interpretation of the financial planning rule that exempted virtually all planning services offered by brokers. As a result, brokers remained free under the revised rule to offer extensive investment advice without being subject to the fiduciary duty or disclosure obligations of the Investment Advisers Act.

For the full 2007 ZAG/CFA survey findings, please go http://www.zeroalphagroup.com on the Web. For the findings of the 2004 ZAG/CFA survey, go to http://www.zeroalphagroup.com/news/cfazagsurvey102704.cfm.

ABOUT ZERO ALPHA GROUP

Founded in 1995, the Zero Alpha Group (http://www.zeroalphagroup.com) is an international network of independent investment advisory firms that manage a total of more than $7 billion in assets. The nine current members of the Zero Alpha Group -- including BHCO, CCM and PHIM -- are committed to providing objective, long-term private wealth management solutions to investors, focusing on asset allocation and a structured, quantitative approach to investing. The firms in the Zero Alpha Group network share a common philosophy about investing and client service - a commitment to passive, tax-managed investment strategies while providing an independent financial planning solution for investors.

CONTACT:   Patrick Mitchell, (703) 276-3266 or .

EDITOR'S NOTE: A streaming audio replay of the related ZAG/CFA April 26, 2007 news event is available on the Web at http://www.zeroalphagroup.com.