SEC Provides Pay to Play No Action Relief


Advisers

Investment advisers breathed a collective sigh of relief late Monday evening when the SEC delivered a no action letter to the Investment Company Institute (“ICI”), ensuring it would not recommend enforcement under certain recordkeeping provisions of the Advisers Act included as part of its focus on pay to play practices. Specifically, the no action letter relates to the requirement that an adviser keep a record of government entities which are, or were, investors in a mutual fund it manages, including those government entities whose assets are held in omnibus accounts.

In requesting relief, the ICI explained that advisers do not always know if a government entity is invested in a fund the adviser manages, especially if the government entity holds shares through an omnibus account, and therefore advisers are unable to comply with the recordkeeping requirement. To help advisers address this lack of transparency, the SEC has granted relief so long as advisers retain the following records:

  • Each government entity invested in a fund the adviser manages whose account(s) can be reasonably identified either using fund or transfer agent records;
  • Each government entity whose account was identified at the time of investment by the adviser or one if its associates;
  • Each government entity that sponsors or establishes a 529 Plan with the adviser; and
  • Each government entity that has been solicited to invest in a fund by an associate of the adviser or an intermediary.

 

 

 

 

 

 

 

   
 
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