SEC Division of Trading and Markets no-action letter: WEBS Index Series

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November 22, 2005

Joanne T. Medero, Esq. Managing Director and General Counsel Barclays Global Investors, N.A. 45 Fremont Street San Francisco, CA 94105

Re: Modification of Prior No-Action Relief with respect to WEBS Index Series (now known as iShares Inc.)

Dear Ms. Medero:

By letter dated May 10, 2000, the staff of the Division of Market Regulation (“Staff”), among other things, granted no-action relief from Section 11(d)(1) of the Securities Exchange Act of 1934 to broker-dealers that do not create shares (“WEBS”) of six new series of securities (collectively, “WEBS Index Series”) issued by WEBS Index Fund, Inc. (“Fund”), but engage in both proprietary and customer transactions in WEBS exclusively in the secondary market (“Non-AP Broker-Dealers”). Specifically, the Staff confirmed that it would not recommend enforcement action to the Commission under Section 11(d)(1) if Non-AP Broker-Dealers extend or maintain or arrange for the extension or maintenance of credit on WEBS in connection with secondary market transactions in WEBS.

In the letter requesting relief (“WEBS Index Series Request for Relief”), counsel stated, “The only compensation a broker-dealer will receive for representing a customer in purchasing WEBS is the commission charged to that customer – most likely the same compensation the broker-dealer would receive in connection with any stock purchase by a customer. There is no special financial incentive to a broker-dealer, other than the broker-dealer’s regular commission, to engage in secondary market transactions in WEBS, whether as principal or agent.” Counsel also explained that the “Fund has adopted a plan under Rule 12b-1 under the 1940 Act (the ‘12b-1 Plan’) in respect of the WEBS Index Series, pursuant to which the Fund may pay for any activities or expenses primarily intended to result in or required for the sale of WEBS of the WEBS Index Series . . . .” In addition, counsel indicated, “It is contemplated that the Distributor will use a portion of the payments made under the 12b-1 Plan to make continuing payments to selected broker-dealers that provide distribution assistance and/or shareholder services.”

Recently, in letters regarding exchange-traded funds (“ETFs”) similar to the WEBS Index Series, the Staff specifically has excluded from the scope of no-action relief from Section 11(d)(1) Non-AP Broker-Dealers that receive 12b-1 fees. See Letters re: PowerShares Lux Nanotech Portfolio (Oct. 26, 2005), at n. 8; PowerShares WilderHill Clean Energy Portfolio (Mar. 2, 2005), at n. 8. In addition, the Staff recently made clear in a letter dated November 21, 2005 (a copy of which is enclosed), that the Section 11(d)(1) relief for Non-AP Broker-Dealers in prior letters involving ETFs, including the May 10, 2000 letter regarding WEBS Index Series, is limited to Non-AP Broker-Dealers that do not (and whose associated persons who are natural persons do not), directly or indirectly (including through any affiliate of such Non-AP Broker-Dealer), receive from the fund complex (as defined in the November 21, 2005 letter) any payment, compensation or other economic incentive to promote or sell the shares of the ETF to persons outside the fund complex, other than non-cash compensation permitted under NASD Rule 2830(l)(5)(A), (B), or (C). See Letter re: Exemptive Relief Regarding Exchange-Traded Funds (Nov. 21, 2005).

Accordingly, a Non-AP Broker-Dealer that receives compensation from the Distributor (as defined in the WEBS Index Series Request for Relief) pursuant to the Fund’s Rule 12b-1 Plan (as defined in the WEBS Index Series Request for Relief) in respect of a particular WEBS Index Series would not be able to extend or maintain or arrange for the extension or maintenance of credit on WEBS of such WEBS Index Series in reliance on the May 10, 2000 letter. However, the Staff will not recommend enforcement action for 120 days from the date of this letter against Non-AP Broker-Dealers that extend or maintain or arrange for the extension or maintenance of credit on WEBS in connection with secondary market transactions in WEBS in reliance on the May 10, 2000 letter, but that do not satisfy the Staff’s no-action position as articulated in the Staff’s November 21, 2005 letter based on existing arrangements.

Sincerely,

Brian A. Bussey Assistant Chief Counsel

Enclosure

cc: W. John McGuire, Esq. Morgan, Lewis & Bockius LLP 1111 Pennsylvania Ave., NW Washington, DC 20004

Donald R. Crawshaw, Esq. Sullivan & Cromwell LLP 125 Broad Street New York, NY 10004

http://www.sec.gov/divisions/marketreg/mr-noaction/websindex112205.htm

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Modified: 11/30/2005