SEC Division of Trading and Markets no-action letter: Securities Industry Association

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February 10, 2005

Mr. Alan Sorcher Vice President & Associate General Counsel Securities Industry Association 1425 K Street, N.W., 7 th Floor Washington, DC 20005-3500

Re: Financial Recordkeeping and Reporting of Currency and Foreign Transactions / Broker-Dealer Customer Identification Rule

Dear Mr. Sorcher:

On February 12, 2004, the staff of the Division of Market Regulation (“Division”), in consultation with the Financial Crimes Enforcement Network, Department of Treasury, issued a letter stating that it would not recommend to the Securities and Exchange Commission (“Commission”) that enforcement action be taken if a broker-dealer treated a registered investment adviser 1 as if it were subject to an anti-money laundering program rule (“AML Rule”) under 31 U.S.C. 5318(h) for the purposes of paragraph (b)(6) of the broker-dealer customer identification rule, 31 CFR 103.122. 2 In the 2004 No-action letter, the Division provided that the letter would be withdrawn without further notice on the earlier of: (1) the date upon which an anti-money laundering program rule for advisers became effective, or (2) February 12, 2005. This letter extends the relief granted in the 2004 No-action letter for eighteen more months or until such time as advisers become subject to an AML Rule.

As set forth in the 2004 No-action letter, and following further consultation with the Financial Crimes Enforcement Network, the Division staff will not recommend enforcement action to the Commission under Rule 17a-8 if a broker-dealer relies on an investment adviser, prior to such adviser becoming subject to an AML Rule, provided all the other requirements and conditions in paragraph (b)(6) of the CIP Rule are met, namely that: (1) such reliance is reasonable under the circumstances; (2) the investment adviser is regulated by a Federal functional regulator; and (3) the investment adviser enters into a contract requiring it to certify annually to the broker-dealer that it has implemented an anti-money laundering program, and that it will perform (or its agent will perform) specified requirements of the broker-dealer’s customer identification program. The relief provided in the 2004 No-action letter and extended by this letter is withdrawn without further action on the earlier of: (1) the date upon which an AML Rule for advisers becomes effective, or (2) July 12, 2006.

This is a staff position with respect to enforcement only and does not purport to express any legal conclusions. It may be withdrawn or modified if the staff determines that such action is necessary to be consistent with the BSA and in the public interest.

Sincerely,

Annette L. Nazareth Director

cc: William J. Fox, Director Financial Crimes Enforcement Network

1

Sections 203 and 203A of the Investment Advisers Act of 1940, and the rules promulgated thereunder, govern which investment advisers must register with the Commission.

2

Letter from Annette L. Nazareth, Director, Division of Market Regulation, Commission, to Alan Sorcher, Securities Industry Association, dated February 12, 2004 (“2004 No-action Letter”).

http://www.sec.gov/divisions/marketreg/mr-noaction/antiml021005.htm

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Modified: 02/11/2005