A recent SEC action could significantly change the way advisors do business. The commission formed a new Investor Advisory Committee whose assignment is to advise the commission on regulatory priorities and provide information to retail investors on issues that the SEC deems important. The committee, which is a requirement of the Dodd-Frank Wall Street Reform and Consumer Protection Act, replaces a former advisory committee that was disbanded after Dodd-Frank became law, according to the SEC.

The committee's mandate is broad, but broker-dealers may be particularly interested in efforts to strengthen investor protection and heighten attention on the standard-of-care issue.

While brokers are not generally considered fiduciaries like investment advisors, the SEC has the authority to create rules that would require broker-dealers to comply with the standards of conduct applicable to investment advisors. Even so, however, some experts say that would be a tough challenge for the SEC.

In welcoming the 21 committee members, Luis Aguilar, a commissioner of the SEC, urged them to "focus on the needs of the retail investor." He cited a growing lack of trust toward investment professionals and the stock market in general. He pointed to a recent survey that showed just 15% of Americans trust the stock market. "Investors continued to withdraw cash from U.S. equity funds in 2011, continuing a trend that has seen a total outflow of a half a trillion dollars from domestic equity funds since 2006," he said publicly. "Research suggests there may also be a decline in the willingness of even younger investors to invest in the stock market. These factors contribute to a sense that Wall Street is rigged against the individual investor, damaging confidence and impeding capital formation," Aguilar said.

The new committee also will evaluate requirements to restrict sales practices, conflicts of interest and compensation schemes for broker-dealers and investment advisors that are contrary to the interest of investors.

In a broader sense, it also will examine the disparate standards of conduct between broker-dealers and investment advisors.

James McRitchie, a former compliance officer and governance commentator, explains that "Dodd-Frank gave the SEC authority to write rules placing more fiduciary duties on brokers. I view that as a plus, but certainly not as a remedy to the problem that too many retail investors don't know who they are dealing with and what their possible conflicts of interests might be."

Despite this mandate, the SEC may find it difficult to impose fiduciary duties on brokers as a result of a precedent set by Delaware courts last year.

That issue involved mandatory proxy access, also mandated by Dodd-Frank, but the courts set another bar to clear when it said the SEC also had to show that the benefits from implementing the rule would clearly outweigh the costs. When the SEC could not do so, the rule was overturned and a precedent was set for future SEC rules to be challenged under the same cost-benefit standard.

Still, the IAC will attempt to codify the difference between a broker and an advisor and suggest clear scenarios under which the terms can be used.

In addition, the committee may suggest regulatory action to prevent confusion when people serve as advisors but are employed by firms that also operate as brokerages.

There is a concern that the largest brokerage firms will be heard by lawmakers while the rules are being formed, while smaller firms and the independents will not be represented by the new rules to be implemented.

McRitchie advises that advisors send the IAC ideas, present balanced analysis and volunteer to provide support. "Help link [the IAC] to recognized experts and organizations that can help inform the debate, including those you disagree with," he says. "If you're going to provide credible advice, you need to know the issues inside and out, as well as the perspective of those who don't agree with you and those on the new committee. Honesty and credibility are central, as is taking the long view."