82 FR 40607 - Edward D. Jones & Co., L.P.

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 82, Issue 164 (August 25, 2017)

Page Range		40607-40609
FR Document		2017-18090
Federal Register, Volume 82 Issue 164 (Friday, August 25, 2017)
[Federal Register Volume 82, Number 164 (Friday, August 25, 2017)]
[Notices]
[Pages 40607-40609]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-18090]



[[Page 40607]]

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SECURITIES AND EXCHANGE COMMISSION

[Investment Advisers Act Release No. 4750; File No. 803-00242]


Edward D. Jones & Co., L.P.

August 22, 2017.
AGENCY: Securities and Exchange Commission (``Commission'')

ACTION: Notice.

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    Notice of application for an exemptive order under section 206A of 
the Investment Advisers Act of 1940 (``Advisers Act'') providing an 
exemption from the written disclosure and consent requirements of 
section 206(3).

APPLICANT:  Edward D. Jones & Co., L.P. (``Applicant'').

RELEVANT ADVISERS ACT SECTIONS:  Exemption requested under section 206A 
from the written disclosure and consent requirements of section 206(3).

SUMMARY OF APPLICATION:  The Applicant requests that the Commission 
issue an order under section 206A exempting it and Future Advisers (as 
defined below) from the written disclosure and consent requirements of 
section 206(3) with respect to principal transactions with 
nondiscretionary advisory client accounts.

FILING DATES:  The application was filed on July 21, 2017.

HEARING OR NOTIFICATION OF HEARING:  An order granting the requested 
relief will be issued unless the Commission orders a hearing. 
Interested persons may request a hearing by writing to the Commission's 
Secretary and serving the Applicant with a copy of the request, 
personally or by mail. Hearing requests should be received by the 
Commission by 5:30 p.m. on September 18, 2017, and should be 
accompanied by proof of service on the Applicant, in the form of an 
affidavit or, for lawyers, a certificate of service. Pursuant to rule 
0-5 under the Advisers Act, hearing requests should state the nature of 
the writer's interest, any facts bearing upon the desirability of a 
hearing on the matter, the reason for the request, and the issues 
contested. Persons who wish to be notified of a hearing may request 
notification by writing to the Commission's Secretary.

ADDRESSES:  Secretary, U.S. Securities and Exchange Commission, 100 F 
Street NE., Washington, DC 20549-1090. Applicant, Laura E. Flores and 
Steven W. Stone, Morgan, Lewis & Bockius LLP, 1111 Pennsylvania Ave. 
NW., Washington, DC 20004.

FOR FURTHER INFORMATION CONTACT:  Kay-Mario Vobis, Senior Counsel, at 
(202) 551-6728, or Robert Shapiro, Branch Chief, at (202) 551-6821 
(Division of Investment Management, Chief Counsel's Office).

SUPPLEMENTARY INFORMATION:  The following is a summary of the 
application. The complete application may be obtained via the 
Commission's Web site at http://www.sec.gov/rules/iareleases.shtml or 
by calling (202) 551-8090.
    The Applicant seeks relief from the written disclosure and consent 
requirements of section 206(3) of the Advisers Act that would be 
similar to relief provided by Advisers Act rule 206(3)-3T (the 
``Rule''), which expired by its terms on December 31, 2016. The relief 
sought by the Applicant, if granted, would be subject to conditions 
similar to those under the Rule, as well as certain revised or 
additional conditions.

Applicant's Representations

    1. The Applicant is registered as an investment adviser with the 
Commission and is a registered broker-dealer. The Applicant offers the 
Edward Jones Guided Solutions[supreg] Flex Account (the ``Program''), a 
nondiscretionary advisory program.
    2. The Applicant commenced offering the Program in 2016 with a 
phased rollout beginning in March and firm-wide availability in July 
2016. Prior to December 31, 2016, the Applicant relied on the Rule to 
engage in principal transactions with its clients in the Program.
    3. As of December 31, 2016, the Applicant had a total of 224,739 
client accounts enrolled in the Program with approximately $39.7 
billion in assets under management. Of the total number of Program 
accounts, 32,150 were eligible for principal trading under the Rule, 
with $8 billion in assets under management as of December 31, 2016. In 
the period of March 21, 2016 through December 31, 2016, 4,595 trades 
were effected in reliance on the Rule in the Program. Approximately 55% 
percent of the trades done in reliance on the Rule in this period were 
purchases by client accounts; the average purchase was approximately 
$12,204. Approximately 45% percent of the trades done in reliance on 
the Rule in this period were sales from client accounts; the average 
sale was approximately $14,311.
    4. The Applicant acknowledges that the Order, if granted, would not 
be construed as relieving in any way the Applicant from acting in the 
best interests of an advisory client, including fulfilling the duty to 
seek the best execution for the particular transaction for the advisory 
client; nor shall it relieve the Applicant from any obligation that may 
be imposed by sections 206(1) or (2) of the Advisers Act or by other 
applicable provisions of the federal securities laws or applicable 
FINRA rules.

Applicant's Legal Analysis

    1. Section 206(3) provides that it is unlawful for any investment 
adviser, directly or indirectly, acting as principal for its own 
account, knowingly to sell any security to or purchase any security 
from a client, without disclosing to the client in writing before the 
completion of the transaction the capacity in which the adviser is 
acting and obtaining the client's consent to the transaction. The Rule 
deemed an investment adviser to be in compliance with the provisions of 
section 206(3) of the Advisers Act when the investment adviser, or a 
person controlling, controlled by, or under common control with the 
investment adviser, acting as principal for its own account, sold to or 
purchased from an advisory client any security, provided that the 
investment adviser complied with the conditions of the Rule.
    2. The Rule required, among other things, that the investment 
adviser obtain a client's written, revocable consent prospectively 
authorizing the adviser, directly or indirectly, acting as principal 
for its own account, to sell any security to or purchase any security 
from the client. The consent was required to be obtained after the 
adviser provided the client with written disclosure about: (i) The 
circumstances under which the investment adviser may engage in 
principal transactions with the client; (ii) the nature and 
significance of the conflicts the investment adviser has with its 
client's interests as a result of those transactions; and (iii) how the 
investment adviser addresses those conflicts. The investment adviser 
also was required to provide trade-by-trade disclosure to the client, 
before the execution of each principal transaction, of the capacity in 
which the adviser may act with respect to the transaction, and obtain 
the client's consent (which may be written or oral) to the transaction. 
The Rule was available only to an investment adviser that was also a 
broker-dealer registered under section 15 of the Securities Exchange 
Act of 1934 (``Exchange Act'') and could only be relied upon with 
respect to a nondiscretionary account that was a brokerage account 
subject to the Exchange Act, and the rules thereunder, and the rules of 
the self-regulatory organization(s) of which it is a member. The Rule 
was not available for principal transactions if the investment adviser 
or

[[Page 40608]]

a person who controlled, was controlled by, or was under common control 
with the adviser (``control person'') was the issuer or an underwriter 
of the security (except that an investment adviser could rely on the 
Rule for trades in which the investment adviser or a control person was 
an underwriter of non-convertible investment-grade debt securities).
    3. The Rule also required the investment adviser to provide to the 
client a trade confirmation that, in addition to the requirements of 
rule 10b-10 under the Exchange Act, included a conspicuous, plain 
English statement informing the client that the investment adviser 
disclosed to the client before the execution of the transaction that 
the investment adviser may act as principal in connection with the 
transaction, that the client authorized the transaction, and that the 
investment adviser sold the security to or bought the security from the 
client for its own account. The investment adviser also was required to 
deliver to the client, at least annually, a written statement listing 
all transactions that were executed in the account in reliance on the 
Rule, including the date and price of each transaction.
    4. The Rule expired on December 31, 2016. Absent the requested 
relief, the Applicant would be required to provide trade-by-trade 
written disclosure to each nondiscretionary advisory client with whom 
the Applicant sought to engage in a principal transaction in accordance 
with section 206(3). The Applicant submits that its nondiscretionary 
clients, many of whom were formerly brokerage clients, have had access 
to the Applicant's inventory through principal transactions with the 
Applicant for a number of years, and expect to continue to have such 
access in the future. The Applicant believes that engaging in principal 
transactions with its clients provides certain benefits to its clients, 
including access to securities of limited availability, such as 
municipal bonds, and that the written disclosure and client consent 
requirements of section 206(3) act as an operational barrier to its 
ability to engage in principal trades with its clients, especially when 
the transaction involves securities of limited availability.
    5. Unless the Applicant is provided an exemption from the written 
disclosure and client consent requirements of section 206(3), the 
Applicant believes that it will be unable to provide the same range of 
services and access to the same types of securities to its 
nondiscretionary advisory clients as it was able to provide to its 
clients under the Rule.
    6. The Applicant notes that, if the requested relief is granted, it 
will remain subject to the fiduciary duties that are generally 
enforceable under sections 206(1) and 206(2) of the Advisers Act, 
which, in general terms, require the Applicant to: (i) Disclose 
material facts about the advisory relationship to its clients; (ii) 
treat each client fairly; and (iii) act only in the best interests of 
its client, disclosing conflicts of interest when present and obtaining 
client consent to arrangements that present such conflicts.
    7. The Applicant further notes that, in its capacity as a broker-
dealer with respect to these accounts, it will remain subject to a 
comprehensive set of Commission and FINRA regulations that apply to the 
relationship between a broker-dealer and its customer in addition to 
the fiduciary duties an adviser owes a client. These rules require, 
among other things, that the Applicant deal fairly with its customers, 
seek to obtain best execution of customer orders, and make only 
suitable recommendations. These obligations are designed to promote 
business conduct that protects customers from abusive practices that 
may not necessarily be fraudulent, and to protect against unfair prices 
and excessive commissions. Specifically, these provisions, among other 
things, require that the prices charged by the Applicant be reasonably 
related to the prevailing market, and limit the commissions and mark-
ups the Applicant can charge. Additionally, these obligations require 
that the Applicant have a reasonable basis to believe that a 
recommended transaction or investment strategy involving a security or 
securities is suitable for the customer, based on information obtained 
through reasonable diligence.
    8. The Applicant requests that the Commission issue an Order 
pursuant to section 206A exempting it from the written disclosure and 
consent requirements of section 206(3) only with respect to client 
accounts in the Program and any similar nondiscretionary program to be 
created in the future. The Applicant also requests that the 
Commission's Order apply to future investment advisers controlling, 
controlled by, or under common control with the Applicant (``Future 
Advisers''). Any Future Adviser relying on any Order granted pursuant 
to the application will comply with the terms and conditions stated in 
the application.\1\
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    \1\ All entities that currently intend to rely on any order 
granted pursuant to the application are named as Applicants.
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Applicant's Conditions

    The Applicant agrees that any Order granting the requested relief 
will be subject to the following conditions:
    1. The Applicant will exercise no ``investment discretion'' (as 
such term is defined in section 3(a)(35) of the Exchange Act), except 
investment discretion granted by the advisory client on a temporary or 
limited basis,\2\ with respect to the client's account.
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    \2\ Discretion is considered to be temporary or limited for 
purposes of this condition when the investment adviser is given 
discretion: (i) As to the price at which or the time to execute an 
order given by a client for the purchase or sale of a definite 
amount or quantity of a specified security; (ii) on an isolated or 
infrequent basis, to purchase or sell a security or type of security 
when a client is unavailable for a limited period of time not to 
exceed a few months; (iii) as to cash management, such as to 
exchange a position in a money market fund for another money market 
fund or cash equivalent; (iv) to purchase or sell securities to 
satisfy margin requirements; (v) to sell specific bonds and purchase 
similar bonds in order to permit a client to take a tax loss on the 
original position; (vi) to purchase a bond with a specified credit 
rating and maturity; and (vii) to purchase or sell a security or 
type of security limited by specific parameters established by the 
client. See, e.g., Temporary Rule Regarding Principal Trades with 
Certain Advisory Clients, Investment Advisers Act Release No. 2653 
(Sept. 24, 2007) at n. 31.
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    2. The Applicant will not trade in reliance on this Order any 
security for which the Applicant or any person controlling, controlled 
by, or under common control with the Applicant is the issuer, or, at 
the time of the sale, an underwriter (as defined in section 202(a)(20) 
of the Advisers Act).
    3. The Applicant will not directly or indirectly require the client 
to consent to principal trading as a condition to opening or 
maintaining an account with the Applicant.
    4. The advisory client has executed a written revocable consent 
prospectively authorizing the Applicant directly or indirectly to act 
as principal for its own account in selling any security to or 
purchasing any security from the advisory client. The advisory client's 
written consent must be obtained through a signature or other positive 
manifestation of consent that is separate from or in addition to the 
signature indicating the client's consent to the advisory agreement. 
The separate or additional signature line or alternative means of 
expressing consent must be preceded immediately by prominent, plain 
English disclosure containing either: (a) An explanation of: (i) The 
circumstances under which the Applicant directly or indirectly may 
engage in principal transactions; (ii) the nature and significance of 
conflicts with its client's interests as a result of the transactions; 
and (iii) how the Applicant addresses those conflicts; or (b) a

[[Page 40609]]

statement explaining that the client is consenting to principal 
transactions, followed by a cross-reference to a specific document 
provided to the client containing the disclosure in (a)(i)-(iii) above 
and to the specific page or pages on which such disclosure is located; 
provided, however, that if the Applicant requires time to modify its 
electronic systems to provide the specific page cross-reference 
required by clause (b), the Applicant may, while updating such 
electronic systems, and for no more than 90 days from the date of the 
Order, instead provide a cross-reference to a specific document 
provided to the client containing the disclosure in (a)(i)-(iii) above 
and to the specific section in such document in which such disclosure 
is located. Transition provision: To the extent that the Applicant 
obtained fully informed written revocable consent from an advisory 
client for purposes of rule 206(3)-3T(a)(3) prior to January 1, 2017, 
the Applicant may rely on this Order with respect to such client 
without obtaining additional prospective consent from such client.
    5. The Applicant, prior to the execution of each transaction in 
reliance on this Order, will: (a) Inform the advisory client, orally or 
in writing, of the capacity in which it may act with respect to such 
transaction; and (b) obtain consent from the advisory client, orally or 
in writing, to act as principal for its own account with respect to 
such transaction.
    6. The Applicant will send a written confirmation at or before 
completion of each such transaction that includes, in addition to the 
information required by rule 10b-10 under the Exchange Act, a 
conspicuous, plain English statement informing the advisory client that 
the Applicant: (a) Disclosed to the client prior to the execution of 
the transaction that the Applicant may be acting in a principal 
capacity in connection with the transaction and the client authorized 
the transaction; and (b) sold the security to, or bought the security 
from, the client for its own account.
    7. The Applicant will send to the client, no less frequently than 
annually, written disclosure containing a list of all transactions that 
were executed in the client's account in reliance upon this Order, and 
the date and price of each such transaction.
    8. The Applicant is a broker-dealer registered under section 15 of 
the Exchange Act and each account for which the Applicant relies on 
this Order is a brokerage account subject to the Exchange Act, and the 
rules thereunder, and the rules of the self-regulatory organization(s) 
of which it is a member.
    9. Each written disclosure required as a condition to this Order 
will include a conspicuous, plain English statement that the client may 
revoke the written consent referred to in Condition 4 above without 
penalty at any time by written notice to the Applicant in accordance 
with reasonable procedures established by the Applicant, but in all 
cases such revocation must be given effect within 5 business days of 
the Applicant's receipt thereof.
    10. The Applicant will maintain records sufficient to enable 
verification of compliance with the conditions of this Order. Such 
records will include, without limitation: (a) Documentation sufficient 
to demonstrate compliance with each disclosure and consent requirement 
under this Order; (b) in particular, documentation sufficient to 
demonstrate that, prior to the execution of each transaction in 
reliance on this Order, the Applicant informed the advisory client of 
the capacity in which it may act with respect to the transaction and 
that it received the advisory client's consent (if the Applicant 
informs the client orally of the capacity in which it may act with 
respect to such transaction or obtains oral consent, such records may, 
for example, include recordings of telephone conversations or 
contemporaneous written notations); and (c) documentation sufficient to 
enable assessment of compliance by the Applicant with sections 206(1) 
and (2) of the Advisers Act in connection with its reliance on this 
Order.\3\ In each case, such records will be maintained and preserved 
in an easily accessible place for a period of not less than five years, 
the first two years in an appropriate office of the Applicant, and be 
available for inspection by the staff of the Commission.
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    \3\ For example, under sections 206(1) and (2), an adviser may 
not engage in any transaction on a principal basis with a client 
that is not consistent with the best interests of the client or that 
subrogates the client's interests to the adviser's own. Cf. 
Investment Advisers Act Release No. 2106 (Jan. 31, 2003) (adopting 
Rule 206(4)-6).
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    11. The Applicant will adopt written compliance policies and 
procedures reasonably designed to ensure, and the Applicant's chief 
compliance officer will monitor, the Applicant's compliance with the 
conditions of this Order. The Applicant's chief compliance officer 
will, on at least a quarterly basis, conduct testing reasonably 
sufficient to verify such compliance. Such written policies and 
procedures, monitoring and testing will address, without limitation: 
(a) Compliance by the Applicant with its disclosure and consent 
requirements under this Order; (b) the integrity and operation of 
electronic systems employed by the Applicant in connection with its 
reliance on this Order; (c) compliance by the Applicant with its 
recordkeeping obligations under this Order; and (d) whether there is 
any evidence of the Applicant engaging in ``dumping'' in connection 
with its reliance on this Order.\4\ The Applicant's chief compliance 
officer will document the frequency and results of such monitoring and 
testing, and the Applicant will maintain and preserve such 
documentation in an easily accessible place for a period of not less 
than five years, the first two years in an appropriate office of the 
Applicant, and be available for inspection by the staff of the 
Commission.
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    \4\ See Report of the Securities and Exchange Commission, 
Investment Trusts and Investment Companies, H.R. Doc. No. 279, 76th 
Cong., 2d Sess., pt. 3, at 2581, 2589 (1939); Hearings on S.3580 
Before a Subcommittee of the Commission on Banking and Currency, 
76th Cong., 3d Sess. 209, 212-23 (1940); Hearings on S. 3580 Before 
the Subcomm. of the Comm. on Banking and Currency, 76th Cong., 3d 
Sess. 322 (1940).

    For the Commission, by the Division of Investment Management, 
under delegated authority.
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-18090 Filed 8-24-17; 8:45 am]
 BILLING CODE 8011-01-P
Federal Register / Vol. 82, No. 164 / Friday, August 25, 2017 / Notices 40607

SECURITIES AND EXCHANGE 551–6728, or Robert Shapiro, Branch relieve the Applicant from any
COMMISSION Chief, at (202) 551–6821 (Division of obligation that may be imposed by
Investment Management, Chief sections 206(1) or (2) of the Advisers
[Investment Advisers Act Release No. 4750;
File No. 803–00242]
Counsel’s Office). Act or by other applicable provisions of
SUPPLEMENTARY INFORMATION: The the federal securities laws or applicable
Edward D. Jones & Co., L.P. following is a summary of the FINRA rules.
application. The complete application Applicant’s Legal Analysis
August 22, 2017. may be obtained via the Commission’s
AGENCY: Securities and Exchange Web site at http://www.sec.gov/rules/ 1. Section 206(3) provides that it is
Commission (‘‘Commission’’) iareleases.shtml or by calling (202) 551– unlawful for any investment adviser,
ACTION: Notice. 8090. directly or indirectly, acting as principal
The Applicant seeks relief from the for its own account, knowingly to sell
Notice of application for an exemptive written disclosure and consent any security to or purchase any security
order under section 206A of the requirements of section 206(3) of the from a client, without disclosing to the
Investment Advisers Act of 1940 Advisers Act that would be similar to client in writing before the completion
(‘‘Advisers Act’’) providing an relief provided by Advisers Act rule of the transaction the capacity in which
exemption from the written disclosure 206(3)–3T (the ‘‘Rule’’), which expired the adviser is acting and obtaining the
and consent requirements of section by its terms on December 31, 2016. The client’s consent to the transaction. The
206(3). relief sought by the Applicant, if Rule deemed an investment adviser to
APPLICANT: Edward D. Jones & Co., L.P. granted, would be subject to conditions be in compliance with the provisions of
(‘‘Applicant’’). similar to those under the Rule, as well section 206(3) of the Advisers Act when
RELEVANT ADVISERS ACT SECTIONS: as certain revised or additional the investment adviser, or a person
Exemption requested under section conditions. controlling, controlled by, or under
206A from the written disclosure and common control with the investment
consent requirements of section 206(3). Applicant’s Representations adviser, acting as principal for its own
SUMMARY OF APPLICATION: The 1. The Applicant is registered as an account, sold to or purchased from an
Applicant requests that the Commission investment adviser with the advisory client any security, provided
issue an order under section 206A Commission and is a registered broker- that the investment adviser complied
exempting it and Future Advisers (as dealer. The Applicant offers the Edward with the conditions of the Rule.
defined below) from the written Jones Guided Solutions® Flex Account 2. The Rule required, among other
disclosure and consent requirements of (the ‘‘Program’’), a nondiscretionary things, that the investment adviser
section 206(3) with respect to principal advisory program. obtain a client’s written, revocable
transactions with nondiscretionary 2. The Applicant commenced offering consent prospectively authorizing the
advisory client accounts. the Program in 2016 with a phased adviser, directly or indirectly, acting as
FILING DATES: The application was filed rollout beginning in March and firm- principal for its own account, to sell any
on July 21, 2017. wide availability in July 2016. Prior to security to or purchase any security
December 31, 2016, the Applicant relied from the client. The consent was
HEARING OR NOTIFICATION OF HEARING:
on the Rule to engage in principal required to be obtained after the adviser
An order granting the requested relief provided the client with written
transactions with its clients in the
will be issued unless the Commission disclosure about: (i) The circumstances
Program.
orders a hearing. Interested persons may 3. As of December 31, 2016, the under which the investment adviser
request a hearing by writing to the Applicant had a total of 224,739 client may engage in principal transactions
Commission’s Secretary and serving the accounts enrolled in the Program with with the client; (ii) the nature and
Applicant with a copy of the request, approximately $39.7 billion in assets significance of the conflicts the
personally or by mail. Hearing requests under management. Of the total number investment adviser has with its client’s
should be received by the Commission of Program accounts, 32,150 were interests as a result of those
by 5:30 p.m. on September 18, 2017, eligible for principal trading under the transactions; and (iii) how the
and should be accompanied by proof of Rule, with $8 billion in assets under investment adviser addresses those
service on the Applicant, in the form of management as of December 31, 2016. conflicts. The investment adviser also
an affidavit or, for lawyers, a certificate In the period of March 21, 2016 through was required to provide trade-by-trade
of service. Pursuant to rule 0–5 under December 31, 2016, 4,595 trades were disclosure to the client, before the
the Advisers Act, hearing requests effected in reliance on the Rule in the execution of each principal transaction,
should state the nature of the writer’s Program. Approximately 55% percent of of the capacity in which the adviser may
interest, any facts bearing upon the the trades done in reliance on the Rule act with respect to the transaction, and
desirability of a hearing on the matter, in this period were purchases by client obtain the client’s consent (which may
the reason for the request, and the issues accounts; the average purchase was be written or oral) to the transaction.
contested. Persons who wish to be approximately $12,204. Approximately The Rule was available only to an
notified of a hearing may request 45% percent of the trades done in investment adviser that was also a
notification by writing to the reliance on the Rule in this period were broker-dealer registered under section
Commission’s Secretary. sales from client accounts; the average 15 of the Securities Exchange Act of
ADDRESSES: Secretary, U.S. Securities sale was approximately $14,311. 1934 (‘‘Exchange Act’’) and could only
and Exchange Commission, 100 F Street 4. The Applicant acknowledges that be relied upon with respect to a
sradovich on DSK3GMQ082PROD with NOTICES

NE., Washington, DC 20549–1090. the Order, if granted, would not be nondiscretionary account that was a
Applicant, Laura E. Flores and Steven construed as relieving in any way the brokerage account subject to the
W. Stone, Morgan, Lewis & Bockius Applicant from acting in the best Exchange Act, and the rules thereunder,
LLP, 1111 Pennsylvania Ave. NW., interests of an advisory client, including and the rules of the self-regulatory
Washington, DC 20004. fulfilling the duty to seek the best organization(s) of which it is a member.
FOR FURTHER INFORMATION CONTACT: Kay- execution for the particular transaction The Rule was not available for principal
Mario Vobis, Senior Counsel, at (202) for the advisory client; nor shall it transactions if the investment adviser or

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Federal Register / Vol. 82, No. 164 / Friday, August 25, 2017 / Notices 40609

statement explaining that the client is 9. Each written disclosure required as under this Order; (b) the integrity and
consenting to principal transactions, a condition to this Order will include a operation of electronic systems
followed by a cross-reference to a conspicuous, plain English statement employed by the Applicant in
specific document provided to the client that the client may revoke the written connection with its reliance on this
containing the disclosure in (a)(i)–(iii) consent referred to in Condition 4 above Order; (c) compliance by the Applicant
above and to the specific page or pages without penalty at any time by written with its recordkeeping obligations under
on which such disclosure is located; notice to the Applicant in accordance this Order; and (d) whether there is any
provided, however, that if the Applicant with reasonable procedures established evidence of the Applicant engaging in
requires time to modify its electronic by the Applicant, but in all cases such ‘‘dumping’’ in connection with its
systems to provide the specific page revocation must be given effect within reliance on this Order.4 The Applicant’s
cross-reference required by clause (b), 5 business days of the Applicant’s chief compliance officer will document
the Applicant may, while updating such receipt thereof. the frequency and results of such
electronic systems, and for no more than 10. The Applicant will maintain monitoring and testing, and the
90 days from the date of the Order, records sufficient to enable verification Applicant will maintain and preserve
instead provide a cross-reference to a of compliance with the conditions of such documentation in an easily
specific document provided to the client this Order. Such records will include, accessible place for a period of not less
containing the disclosure in (a)(i)–(iii) without limitation: (a) Documentation than five years, the first two years in an
above and to the specific section in such sufficient to demonstrate compliance appropriate office of the Applicant, and
document in which such disclosure is with each disclosure and consent be available for inspection by the staff
located. Transition provision: To the requirement under this Order; (b) in of the Commission.
extent that the Applicant obtained fully particular, documentation sufficient to
For the Commission, by the Division of
informed written revocable consent demonstrate that, prior to the execution Investment Management, under delegated
from an advisory client for purposes of of each transaction in reliance on this authority.
rule 206(3)–3T(a)(3) prior to January 1, Order, the Applicant informed the Eduardo A. Aleman,
2017, the Applicant may rely on this advisory client of the capacity in which
Assistant Secretary.
Order with respect to such client it may act with respect to the
transaction and that it received the [FR Doc. 2017–18090 Filed 8–24–17; 8:45 am]
without obtaining additional BILLING CODE 8011–01–P
prospective consent from such client. advisory client’s consent (if the
5. The Applicant, prior to the Applicant informs the client orally of
execution of each transaction in reliance the capacity in which it may act with
respect to such transaction or obtains SECURITIES AND EXCHANGE
on this Order, will: (a) Inform the COMMISSION
advisory client, orally or in writing, of oral consent, such records may, for
the capacity in which it may act with example, include recordings of Proposed Collection; Comment
telephone conversations or Request
respect to such transaction; and (b)
contemporaneous written notations);
obtain consent from the advisory client,
and (c) documentation sufficient to Upon Written Request, Copies Available
orally or in writing, to act as principal
enable assessment of compliance by the From: Securities and Exchange
for its own account with respect to such
Applicant with sections 206(1) and (2) Commission, Office of FOIA Services,
transaction.
of the Advisers Act in connection with 100 F Street NE., Washington, DC
6. The Applicant will send a written its reliance on this Order.3 In each case, 20549–2736.
confirmation at or before completion of such records will be maintained and
each such transaction that includes, in Extension:
preserved in an easily accessible place Form 24F–2; SEC File No. 270–399, OMB
addition to the information required by for a period of not less than five years, Control No. 3235–0456
rule 10b–10 under the Exchange Act, a the first two years in an appropriate
conspicuous, plain English statement Notice is hereby given that pursuant
office of the Applicant, and be available to the Paperwork Reduction Act of 1995
informing the advisory client that the for inspection by the staff of the
Applicant: (a) Disclosed to the client (44 U.S.C. 3501–3520), the Securities
Commission. and Exchange Commission (the
prior to the execution of the transaction 11. The Applicant will adopt written
that the Applicant may be acting in a ‘‘Commission’’) is soliciting comments
compliance policies and procedures
principal capacity in connection with on the collection of information
reasonably designed to ensure, and the
the transaction and the client authorized summarized below. The Commission
Applicant’s chief compliance officer
the transaction; and (b) sold the security plans to submit this existing collection
will monitor, the Applicant’s
to, or bought the security from, the of information to the Office of
compliance with the conditions of this
client for its own account. Management and Budget for extension
Order. The Applicant’s chief
7. The Applicant will send to the and approval.
compliance officer will, on at least a Rule 24f–2 (17 CFR 270.24f–2) under
client, no less frequently than annually, quarterly basis, conduct testing
written disclosure containing a list of all the Investment Company Act of 1940
reasonably sufficient to verify such (15 U.S.C. 80a) requires any open-end
transactions that were executed in the compliance. Such written policies and
client’s account in reliance upon this management companies (‘‘mutual
procedures, monitoring and testing will funds’’), unit investment trusts (‘‘UITs’’)
Order, and the date and price of each address, without limitation: (a)
such transaction. or face-amount certificate companies
Compliance by the Applicant with its
8. The Applicant is a broker-dealer
sradovich on DSK3GMQ082PROD with NOTICES

disclosure and consent requirements 4 See Report of the Securities and Exchange
registered under section 15 of the Commission, Investment Trusts and Investment
Exchange Act and each account for 3 For example, under sections 206(1) and (2), an Companies, H.R. Doc. No. 279, 76th Cong., 2d Sess.,
which the Applicant relies on this Order adviser may not engage in any transaction on a pt. 3, at 2581, 2589 (1939); Hearings on S.3580
is a brokerage account subject to the principal basis with a client that is not consistent Before a Subcommittee of the Commission on
with the best interests of the client or that Banking and Currency, 76th Cong., 3d Sess. 209,
Exchange Act, and the rules thereunder, subrogates the client’s interests to the adviser’s 212–23 (1940); Hearings on S. 3580 Before the
and the rules of the self-regulatory own. Cf. Investment Advisers Act Release No. 2106 Subcomm. of the Comm. on Banking and Currency,
organization(s) of which it is a member. (Jan. 31, 2003) (adopting Rule 206(4)–6). 76th Cong., 3d Sess. 322 (1940).

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Document Created: 2018-10-24 12:41:10
Document Modified: 2018-10-24 12:41:10
Category		Regulatory Information
Collection		Federal Register
sudoc Class		AE 2.7: GS 4.107: AE 2.106:
Publisher		Office of the Federal Register, National Archives and Records Administration
Section		Notices
Action		Notice.
Dates		The application was filed on July 21, 2017.
Contact		Kay-Mario Vobis, Senior Counsel, at (202) 551-6728, or Robert Shapiro, Branch Chief, at (202) 551-6821 (Division of Investment Management, Chief Counsel's Office).
FR Citation		82 FR 40607