If my sources in Washington are right, by the time this column is published, SEC chairman Mary Schapiro will have either announced her grand unification scheme for "modernizing" financial services regulation, or will have signaled her intent to do so shortly. Like all good journalists, I've been studying everything Schapiro says for clues to what's coming. She has made this task immeasurably easier by saying just one thing over and over again.

In every interview, she says that financial advisors and brokers ought to be brought under the same regulatory system because-here's the key part of the statement-the public perceives what they do as the same. I have a feeling that if you were to wake Ms. Schapiro from a deep sleep and ask her any question at all, she would mumble something about the public believing that brokers and advisors provide the same services, and add something about normalizing their regulation.

There are two small problems with these oft-repeated statements-what I call The Schapiro Doctrine:

1. Brokers and advisors do not provide the same services. Brokers are the paid representatives of manufacturers of financial products. Their job is to gather assets for their firms or sell products that their firms manufacture or otherwise want to peddle to the consuming public. Advisors, meanwhile, provide independent evaluation of investments and give personal finance advice. Brokers are paid by their companies; advisors by the consumer directly. Whether the consumer is confused should be irrelevant; regulation should be defined by the actual facts and circumstances.

2. The main job of those who protect consumers (and regulators surely belong in this category) is to help the public recognize these differences, and to act accordingly. Consumers know whom to trust because key regulators explain it to them. Manifest public confusion about who sells products and who provides advice is a failure the regulator ought to address. If the Food and Drug Administration detected that a company was offering tainted products, it wouldn't throw up its hands and say, well, the public doesn't seem to know the difference. It would act quickly to help consumers understand and deal with the threat.

AN INDECENT PROPOSAL

If the Schapiro Doctrine is indeed a valid foundation for regulation, perhaps the government should consider improving all consumer protection by applying it to other fields and endeavors. Let's suppose, for example, that a nationwide organization decided to hire English majors out of college and send them out to sell legal services. This enterprising company would manufacture a variety of legal templates that the eager young recruits would sell as valid trusts or durable powers of attorney for any situation, the main criteria being that these documents be made by the company and not some rival. The English majors would dress up in business suits and provide legal advice on torts and trusts and criminal charges. Some of them might try to do their best for their customers, just like many brokers are serious about helping the public. But at the firm level, this blurred distinction-they're not lawyers; they only sell legal products-offers great potential for harm.

Instead of warning the public, the regulatory authorities would follow the Schapiro Doctrine by carefully documenting the public's inability to distinguish between a person who actually had passed the bar exam and young salespeople of legal documents. The regulators would then create a new, "modernized" regulatory structure that put the English majors on equal footing with lawyers. It would recognize that new potential conflicts of interest had been introduced into the profession, and force lawyers to fill out a whole lot of new paperwork substantiating that the advice they gave was not driven by a commission-even though, of course, the lawyers never collected any commissions.

Then everybody would be happy, right? Meanwhile, I think there is great opportunity for a medical startup to hire some of those same English majors to sell templated medical advice, and to write prescriptions on all sorts of controlled substances used in the treatment process. In this case, the firm could affiliate with a drug company or two to make sure that remedies manufactured by those companies were recommended exclusively.

The result? Following the Schapiro Doctrine, those who regulated doctors would conduct studies showing that consumers who walked into the offices of the startup medical sales organization thought they were walking into doctors' offices. Research would show that these consumers couldn't tell the difference between actual doctors and the English majors. Then the regulators would decree that those English majors should be regulated like doctors, and vice versa.

A new army of regulatory auditors would be crawling over every doctor's office, making sure the horrible conflicts of interest introduced by the new firm (and its many clones, once people realize they can get away with this), are not being acted on by professional holders of the MD designation. Finally, normalized regulation!