RegAlert2010-07-28
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SEC Division of Investment Management staff letter: WilmerHale, LLP
WilmerHale, LLP requests that the SEC staff assure federally-registered investment advisers they would not violate Advisers Act Rule 204A-1 or Rule 204-2 if they do not require access persons to report transactions or holdings in Qualified Tuition Programs (529 Plans). The request applies to interests in any 529 Plan, provided the adviser or a control affiliate does not manage, distribute, market, or underwrite the plan. The letter argues that 529 Plans, particularly college savings plans and prepaid tuition plans, present little opportunity for the improper trading that the reporting rules are designed to uncover.
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- WILMERI-IALE
July 28,2010 Jamea E. Andeuon
+1 2026636180 (t) Douglas J. Scheidt, Esq. +1 202 663 6363 (f) Associate Director and Chief Counsel james.anderson@Wilmerhale.com Division ofInvestment Management Securities and Exchange Commission 100 F Street NE Washington, DC 20549 RE: Application ofAdvisers Act Rule 204A-l to Qualified Tuition Programs D.~ar Mr. Scheidt:
On behalfofour clients, we respectfully request that the staff ofthe Securities and Exchange Commission ("SEC") advise us that a federally-registered investment adviser would not be deemed to have violated Section 204A, Section 204, Rule 204A-l, or Rule 204-2 under the Investment Advisers Act of 1940 ("Advisers Act") ifthe investment adviser does not require its access persons to report their transactions or holdings in Qualified Tuition Programs established pursuant to Section 529 ofthe Internal Revenue Code of 1986 ("529 Plans,,).1f We request that the staffprovide such assurances with respect to transactions or holdings in interests in any 529 Plan, provided that the investment adviser or a control affiliate does not manage, distribute, market, or underwrite the 529 Plan or the investments and strategies underlying the 529 Plan that is a college savings plan. Interests in certain 529 Plans (i.e., college savings plans) are regulated as ''municipal fund securities" under rules adopted by the Municipal Securities Rulemaking Board ("MSRB"), and thus fall within the Rule 204A-l definition of "reportable security." Interests in other 529 Plans (i.e., prepaid college tuition plans), may not be securities at all, however, in the absence of any SEC or staffposition on the matter, investment advisers are uncertain as to whether they should treat such interests as "reportable securities."Y We believe that investments in 529 Plans of either type generally do not present the sorts ofrisks that Rule 204A-l or the associated recordkeeping requirements in Rule 204-2 were intended to address.
I. 529 Plans
Authorized in Section 529 of the Internal Revenue Code, 529 Plans are established and maintained by States, state agencies, and other state entities (each a "State Entity") to help families save money for higher education expenses.J! A State Entity may sell the interests in a )j Internal Revenue Code § 529,26 U.S.C. 529 (2006).
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