SEC Division of Investment Management staff letter: Pershing Division of Donaldson, Lufkin & Jenrette Securities Corp.

ACI .J"V
SECON
BULE
P~f~n-f Advì.",(/'- Æc.f ió tf-,3
UNITED STATES PUBLIC
SECURITIES AND EXCHANGE CO*~ q /s- /t'f WASHINGTON. D.C. 20549 DIVISION OF INVESTMENT MANAGEMENT September 15, 1994

Michael D. Udoff, Esq.

Vice President
Pershinq Division of Donaldson, Lufkin & Jenrette

Securi ties Corp.

One Pershinq Plaza

Jersey City, NJ 07399

Dear Mr. Udoff:

Your letter of Auqust 12, 1994 reqests assurance that the Division of Investant Manaqement would not recomend enforcement action to the Coaiasion if the Perahinq Division of Donaldson, Lufkin & Jenrette Securities Corpration ("Pershinq/DLJ") includes in the disclosure documnt reqired to be provided to clients and prospective clients of the wrap fee program that it sponsors (the "wrap fee brochure") information about another advisory proqram sponsored by Pershinq/DLJ, and provides the wrap fee brochure to clients of both the wrap fee program and the other program in lieu of Part II of DLJ' s Form ADV. Accordinq to your letter, Pershinq/DLJ is the sponsor of,

and acts as clearinq broker for, two proqrams called PEAK I and

PEAK II that are available to customers of introducinq

broker/dealers. You state that PEA I is a "wrap fee proqram" as

defiped in rule 204-3 (q) (4) under the Investment Advisers Act of

1940 under which clients primarily are referred to independent

portfolio manaqers. You state that Peak II is a mutual fund

asset allocation program (~, a program under which the

allocation of client assets amonq investment companies is

recommended), and is therefore not a wrap fee program under rule

204-3 (q) (4) . Perahinq/DLJ proposes to include the required disclosure about the PEA I and PEA II programs in a sinqle brochure that would be provided to clients and prospective

clients of both programs.

Rule 204-3, as recently amended, requires that the sponsor

of a wrap fee program deliver the wrap fee brochure to

prospective clients of the program, and annually 0tfer to deliver

the wrap fee brochure to existinq program clients. The wrap fee

brochure must be separate from the brochure the adviser is

required to provide to other advisory Clients, and any

~ Al Instruction 9 of Form ADV.

2 Paraqraph (f) (1) of rule 204~3.

• 2
  informtion that is included in th wrap fee brochure in addition

to that which is spcifically reqire must re limited to .

informtion concerning the wrap fee program. As a result,

extensive disclosure about an adviser's services other than its wrap fee program generally cannot be included in the wrap fee brochure. Mutual fund asset alloction program were not included

within the definition of a wrap fee program in the recent

amendmnts.4 Accordingly, disclosure abut these programs may be

provided to clients and prospective clients through Part II of

the sponsor's Form ADV or a docUfent containing at least the

information required by Part II. Mutual fund asset allocation

programs, however, are similar in certain respects to wrap fee

programs covered by the amendments and may be marketed to the

same types of investors. It therefore may be helpful to

investors to include disclosure about a sponsor's mutual fund asset allocation programs in the sa documnt as disclosure about the sponsor's wrap fee program. Accordingly, basa on the facts and representations in your letter and without necessarily agreeing with your analysis, we

would not recommend enforcement action to the Commission if

Pershing/DLJ includes the disclosure required by Part II of Form

ADV about the PEA II program in the wrap fee brochure required

under paragraph (f) of rule 204-3, and provides that wrap fee brochure to cl ients and prospective cl ients of both the PEA I and PEA II programs in lieu of Part II of Form ADV and as

required by rule 204-3. You should note that any different facts

or representations might lead to a different conclusion.

Sincerely, i29AL
Robert E. Plaze

Assistant Director

3 Id.
4 Certain mutual fund asset alloction programs were proposed to be included in the wrap fee disclosure requirements. ~ Investment Adiser Act ReI. Ho. 1401 (Jan. 13, 1994) (59 FR

3033 (Jan. 20, 1994) l. As adopted, however, the amendment. do not apply to mutual fund asset allocation programs. ~ Investment A~visers Act Rel. No. 1411 (Apr. 19, 1994) (59 FR

2l6s7 (Apr. 26, 1994)).

5 Paragraph (a) of rule 204-3.

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W~ D.C. 20549 ll: Wrap Broche reui.

purauant to R.eu No. IA-1411
(FUe No. 87-2-94)

Dea Mr. Pla:

I am wrtin¡ in fuan of our converon regading PennaU iponsrsp or ce wrap account an mutu tù us aloction program prncipay in the conte of fu1y-dislose cleang reatonsp. with inoduc broke/deeri. The prpa progr iponsrec by Pershi which are avaable to customes of lrtrodl".ing'broke/deaers are PBAK I and PEA U. PEAK I is a stadard wrap acun program utlUzn¡ pry independen profesona portoUo mage. PEAK n is a mutual fu as aUocaton pro¡ram. At prt. custmes Intested in PEAK progr reve a

kit which conta deriptive inrmon on bo ptogrln DLJ1 ADV, Par n. The ADV, Par U it a1 iacldercui inormn with repe to bo program..

Adonaly, th inoducin¡ brker/cl win lnc it own AnV, Par n in the kit u weU

u th of any PEA I portolio mager seec .
AI requi by Reea No. IA-1411, efec Oc 1, 1994. PerS will uti a

seate brohure to provide required disc0aure to customes regadig the PEA I progr. Althoug PE li, as a mual fund asset allocation progr appea to be exempt trom th sepaat brochure reuien we would propose to al include comparle PEA n providing PEAK U custme with DU'1 AnV. discoaues in the sae brochure, in lieu of

Par n. Such customer woul, of cour, co to recive the introducig broke/deaetl AnV. Par n which incudeJ discosu with respect to both PEAK I and PBAK U.

We be th th above approach. in gen, and parcuarly in th contex of a cleau¡ retinshIp, wi avo cutome confsin, wl uetag th blt\on of

inoron regadina th program a1 avaUle to th Fure.

we beev ths appoac is consstent with Secon 2043 of the Intment Advin Ai which pendts a separate written document contans at lea u mu inrmon II requited

H. P.3 i:4 ' ~ æ: G3 PEING LEGA/C by Fo AD. Pa n to be utiz in li afPai D. We bee th be th øp llsh¡l broce an th iniroducl broke/deaers ADV, Par n th CUltme wil

reve as much, or more inormation, th is requied under Secon 2043.

Ba ODd th fore¡ we resny reues your eay ..pons u to wh ou pi., aproch ls colitent wi th ..it"t\OI1 whi bec etve on Oc lit. Tb yo for your coes in this ma. SiDy, ..