SEC Division of Corporation Finance no-action letter: The Money Management Institute

Steven W. Stone
Partner
+1.202.739.5453 steve.stone@morganlewis.com
April 2, 2019
David Fredrickson
Chief Counsel and Associate Director, Division of Corporation Finance United States Securities and Exchange Commission 100 F Street NE Washington, DC 20549 Re: The Money Management Institute – “Constructive Delivery” of Mutual Fund Prospectuses to Discretionary Investment Advisers Dear Mr. Fredrickson:
On behalf of the Money Management Institute (“MMI”), we request that the staff of the Division of Corporation Finance of the Securities and Exchange Commission (“SEC”) confirm that a broker-dealer may satisfy its obligations under Section 5(b)(2) of the Securities Act of 1933 (the “Securities Act”) to deliver a prospectus to a client of an investment adviser purchasing shares of investment companies registered under the Investment Company Act of 1940 (“mutual funds”) by delivering the mutual fund prospectus to the investment adviser so long as the broker-dealer knows that the investment adviser is authorized to manage the client’s account on a discretionary basis and to accept delivery of mutual fund prospectuses on behalf of the client. By way of background, MMI is the national organization for the advisory solutions industry and represents a broad spectrum of investment advisers that manage accounts on a discretionary basis. MMI is requesting this interpretive guidance because its members routinely receive feedback from advisory clients with discretionary accounts who are annoyed and overwhelmed by the large volume of mutual fund prospectuses they receive and do not wish to receive these prospectuses. Many of these clients are nevertheless forced to receive such prospectuses because, in some cases, the broker-dealers purchasing such mutual fund shares are concerned that delivery of the prospectuses directly to these clients might be required by Section 5(b)(2) of the Securities Act. Below we outline requested guidance that would confirm that a broker-dealer may rely on “constructive delivery” of mutual fund prospectuses to a client’s discretionary investment adviser consistent with the adviser’s fiduciary duty and common law agency principles. Morgan, Lewis & Bockius LLP 1111 Pennsylvania Avenue, NW Washington, DC 20004 +1.202.739.3000 United States +1.202.739.3001 DB1/ 76817710.17