SEC Division of Corporation Finance no-action letter: Waterside Enterprises, LLC

Waterside Enterprises, LLC
Fourth Annual Report to
JPMorgan Chase Bank, N.A.
On Activities Related to
Securities Act
Rule 506 of Regulation D
December 5, 2019
Respectfully Submitted:
Paul V. Bruce
Beth E. Weimer
Waterside Enterprises, LLC.

Fourth Annual Report to JPMorgan Chase Bank, N.A.
December 5, 2019
Waterside Enterprises, LLC, the Independent Compliance Consultant (“Waterside” or “ICC”) engaged pursuant to a waiver of disqualification granted by the Securities and Exchange Commission (“SEC” or “Commission”) in 2015,1 hereby submits the fourth annual review of the JPMorgan Chase Bank, N.A. (“JPMCB” or “Bank”) and its subsidiaries, the “Rule 506 Entities,”2 activities with regard to transactions from 2018 in accordance with Rule 506 of Regulation D under the Securities Act of 1933 (“Securities Act”).3 Waterside conducted the fourth annual comprehensive review of the JPMorgan Chase Bank Wealth Management policies and procedures applicable to compliance with Rule 506, reviewing those policies and procedures in place in 2018 and testing a statistically valid random sampling of transactions conducted in 2018 in reliance on Rule 506 of Regulation D. In order to accomplish the ICC work as required by the SEC Order for 2018 transactions, Waterside reviewed:

• Requirements of Regulation D;
• Business processes applicable to private placement activity relying on Rule 506 of
  Regulation D;
• Written policies and procedures pertaining to the requirements of Regulation D; and
• Offering and marketing documents for products within the scope of the Order.
  The Rule 506 Entities act as investment manager, placement agent or issuer in offering hedge funds, private equity funds and structured products that rely on the Rule 506 of Regulation D exemption from registration.
  I. Background
  Under federal securities laws, a company or private fund may not offer or sell securities unless the securities have been registered with the SEC or an exemption from registration is available. Rule 506 of Regulation D is such an exemption and is considered a safe harbor for the private offering exemption of Section 4(a)(2) of the Securities Act. Companies relying on the Rule 506 exemption from registration must satisfy the following five standards:
  1 Securities Act of 1933, Release No. 9993, December 18, 2015 (“Order”).
  2 The “Rule 506 Entities” are JPMorgan Chase Bank, N.A. including the Singapore, Hong Kong and Paris Branches and the following of its subsidiaries or affiliates: J.P. Morgan International Bank, Ltd., J.P. Morgan (Suisse) S.A. In past years, J.P. Morgan Securities (Far East) Limited, Seoul Branch was also a Rule 506 Entity, but in 2018, there were no activities in scope from this entity. J.P. Morgan Securities LLC (a U.S. registered broker/dealer) is not a Rule 506 Entity; therefore its Regulation D placements are out of scope for this review. In addition, placements relying on an exemption from registration offered by Regulation S of the Securities Act are not in scope for this review. 3 For additional background information on the Order and the ICC review, See, Appendix A, attached.