SEC Division of Investment Management staff letter: Vanguard Group, Inc.

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Investment Company Act of 1940 - Sections 12(d)(3), 17(a) and 17(d) and Rille 17d-1 The Vanguard Group, Inc. RESPONSE OF THE OFFICE OF INVESTMENT COMPANY REGULATION Our Ref. No. 2009-2-ICR DIVISION OF INVESTMENT MANAGEMENT The Vanguard Group, Inc. The Vanguard Group, Inc. ("VGI")! requests that the Division ofInvestment Management (the "Division") confirm that the orders discussed in its letter of May 22, 2009,2 particularly the Section 12(d)(3) Order and the Fund Distribution Order, permit VGI to acquire and operate a wholly-owned subsidiary3 that will provide investment advisory services to investment funds and other persons, including registered investment companies, and engage in securities related activities that are associated with the administration, investment management and distribution ofthe investment funds. VGI also requests that the Division confirm that the SEC Orders permit VGI to engage in the transactions described in those orders with the acquired wholly owned subsidiary. In effect, VGI requests that we confirm its view that VGI may engage in the same activities permitted under the SEC Orders through acquired wholly-owned subsidiaries that it could engage in directly. The letter notes that under the SEC Orders, including the Section 12(d)(3) Order and the Fund Distribution Order, Vanguard Funds have created, and own and operate as wholly owned subsidiaries ofVGI, among other things, two registered investment advisers, a registered broker-dealer, and two trust companies, and provide, among other things, value added services such as website tools, asset allocation and advice, brokerage and retirement plan administration. VGI from time to time contemplates acquiring an entity the primary business ofwhich consists of providing investment advisory services to investment funds and other persons, including registered investment companies. VGI believes that the SEC Orders permit it to acquire an existing advisory business as its wholly-owned subsidiary and to engage in transactions with that subsidiary. VGI explains, however, that because the SEC Orders, and particularly the Section 12(d)(3) Order and Fund Distribution Order, do not For purposes ofthis letter, the term "Vanguard" means the internalized mutual fund complex composed ofThe Vanguard Funds ("Vanguard Funds") and VGI. Investment Company Act Release Nos. 8644 (Jan. 17, 1975) (notice) and 8676 (Feb. 18, 1975)(order); Investment Company Act Release Nos. 9616 (Jan. 19, 1977) (notice) and 9664 (March 4, 1977) (order) (the "Section 12(d)(3) Order"); Investment Company Act Release Nos. 9850 (July 15, 1977) (notice), 9927 (Sep. 13, 1977) (preliminary order for hearing) and 11645 (Feb. 25, 1981) (Opinion ofthe Commission and Final Order) (the "Fund Distribution Order"); Investment Company Act Release Nos. 11718 (April 6, 1981) (notice) and 11761 (May 4, 1981) (order); Investment Company Act Release Nos. 13566 (Oct. 5, 1983) (notice) and 13613 (Nov. 3,1983) (order); Investment Company
Act Release Nos. 15788 (June 9, 1987) (notice) and 15846 (July 2, 1987) (order); and Investment Company Act Release Nos. 19011 (Oct. 9, 1992) (notice) and 19184 (Dec. 29, 1992) (order) (together, the "SEC Orders"). The term "wholly-owned subsidiary" ofa person is defined in Section 2(a)(43) ofthe Investment Company Act of 1940 as "a company 95 per centum or more ofthe outstanding voting securities of which are owned by such person, or by a company which, within the meaning ofthis paragraph, is a wholly-owned subsidiary of such person."