NEW YORK (Dow Jones)--A draft financial-service reform proposal unveiled Tuesday by Sen. Christopher Dodd (D-Conn.) won applause from financial advisers and state regulators.

"The draft legislation's treatment of issues that would directly affect investment advisers represents a very thoughtful and knowledgeable approach," the Investment Adviser Association said in a statement.

The 1,100-plus page document circulated by Dodd, chairman of the Senate Banking Committee, calls for brokers who give investment advice to meet the same fiduciary standard as investment advisers, who must act in their clients' best interest.

This limits confusion and "seems like the cleanest and best way to provide investors with a workable and common standard of care," Dan Barry, director of government relations for the Financial Planning Association, said in an email.

The Investment Adviser Association commended Dodd for not including any provisions that would extend the Financial Industry Regulatory Authority's oversight to investment advisers, as a bill that passed the House Financial Services Committee last week does.

A self-funding mechanism for the Securities and Exchange Commission called for in the Senate draft will provide more stable funding for the agency and allow it to make long-term decisions on staffing, technology and other necessary resources, the adviser association said.

Additionally, the draft would increase the assets-under-management threshold for investment advisers registering with the SEC to $100 million from $25 million. That's expected to shift oversight of more than 4,000 investment advisers to states.

State regulators welcome the additional responsibility, Denise Voigt Crawford, president of the North American Securities Administrators Association and Texas Securities Commissioner, said in a statement. She also called Dodd's proposal "a very positive step in the right direction" toward boosting investor protection and confidence in financial markets and regulators.

Other provisions of the draft call for investment advisers to use independent custodians to hold client assets and allow investors to sue people who help commit securities fraud.

The Senate Banking Committee is expected to begin marking up the financial-service reform bill in early December, following a comment period.

The full House aims to vote on its financial-service reform legislation in early December. House Financial Services Committee Chairman Barney Frank (D-Mass.) said Tuesday he's confident the two chambers will be able to pass a reform package soon.

(Kristen McNamara writes Practice Management, a column that looks at ways financial advisers can build and improve their business. She can be reached at               212-416-2238         212-416-2238 or This e-mail address is being protected from spambots. You need JavaScript enabled to view it .)

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