SEC's Division of Investment Management Issues Information Update for Advisers Relying on Unibanco No-Action Letters | Practical Law

SEC's Division of Investment Management Issues Information Update for Advisers Relying on Unibanco No-Action Letters | Practical Law

The staff of the SEC's Division of Investment Management has issued an Information Update for multi-national financial firms relying on a line of no-action letters that discuss the extraterritorial application of the Advisers Act, commonly referred to as the "Unibanco letters."

SEC's Division of Investment Management Issues Information Update for Advisers Relying on Unibanco No-Action Letters

by Practical Law Corporate & Securities
Published on 16 Mar 2017 • USA (National/Federal)
The staff of the SEC's Division of Investment Management has issued an Information Update for multi-national financial firms relying on a line of no-action letters that discuss the extraterritorial application of the Advisers Act, commonly referred to as the "Unibanco letters."
The staff of the SEC's Division of Investment Management has issued an Information Update for multi-national financial firms relying on a line of no-action letters that discuss the extraterritorial application of the Advisers Act, commonly referred to as the "Unibanco letters." In the Unibanco letters:
  • The staff provided assurances that it would not recommend enforcement action to the SEC regarding the applicability of the substantive provisions of the Advisers Act with respect to a non-US investment adviser's relationships with its non-US clients.
  • The staff agreed not to recommend enforcement action to the SEC under Section 203(a) of the Advisers Act if a non-US advisory affiliate of a registered adviser, often termed a "participating affiliate," shares personnel with, and provides certain services to US clients through, the registered adviser, without the participating affiliate registering under the Advisers Act.
Generally, the staff has provided assurances that it would not recommend enforcement action to the SEC in situations where:
  • The unregistered participating affiliate and the registered adviser are separately organized.
  • The registered adviser is staffed with personnel (located in the US or abroad) who are capable of providing investment advice.
  • All personnel of the participating affiliate involved in US advisory activities are deemed "associated persons" of the registered adviser.
  • The SEC has adequate access to trading and other records of the participating affiliate and to its personnel to the extent necessary to enable the SEC to identify conduct that may harm US clients or markets.
Reliance on the Unibanco letters is conditioned on advisers committing to certain representations and undertakings, including maintaining certain records and providing the SEC with access to their foreign personnel.
The Information Update provides that, for arrangements in which one or more participating affiliates seek to share personnel with, and provide certain services to US clients through, the registered adviser without registering under the Advisers Act, the staff generally believes that documentation of the following general representations and undertakings by participating affiliates addresses most clearly the concerns raised in the Unibanco letters regarding the staff's ability to monitor the conduct of participating affiliates:
  • The name of the participating affiliate and registered adviser, and a representation that the participating affiliate is an associated person of the registered adviser within the meaning of Section 202(a)(17) of the Advisers Act.
  • Documentation of the appointment of an agent for service of process by a participating affiliate, including the name and contact information of the agent.
  • A representation that the participating affiliate is under the jurisdiction of US courts for actions arising, directly or indirectly, under US securities laws or the securities laws of any state in connection with any of the following for US clients:
    • investment advisory activities;
    • related securities activities arising out of or relating to any investment advisory services provided by the participating affiliate through its registered adviser; and
    • any related transactions.
    In addition, a representation that the participating affiliate has designated and appointed, without power of revocation, an agent who may be served all relevant process, pleadings, or other papers in any investigation or administrative proceeding conducted by the SEC, and in any civil suit or action brought against the registered adviser or the participating affiliate or in which the participating affiliate has been joined as defendant or respondent.
  • A representation that any civil suit or action or administrative proceeding may be commenced by the service of process on, and service of an administrative subpoena will be effective service on, the agent, and the service will be taken and held in all courts and administrative tribunals to be valid and binding as if personal service has been made.
  • A representation that the participating affiliate:
    • will appoint a successor agent if the participating affiliate or any person discharges the agent, or the agent is unwilling or unable to accept service on behalf of the participating affiliate, at any time until six years have elapsed from the date of the last investment advisory activity; and
    • undertakes to advise the SEC promptly of any change to the agent's name or address during the applicable period.
  • A representation that the participating affiliate will promptly, on receipt of an administrative subpoena, demand, or request for voluntary cooperation made during a routine or special inspection or otherwise, provide to the SEC or its staff any and all of the books and records required to be maintained in accordance with staff guidance, and make available for testimony before, or other questioning by, the SEC or its staff the employees of the participating affiliate (other than clerical or ministerial personnel) involved in the investment advisory activities or related securities transactions, at a place in the US designated by the SEC or, at the SEC's option, in the country where the records are kept or the personnel reside.
  • A representation that the participating affiliate will produce, as a result of an administrative subpoena or a request for voluntary cooperation, any documents in accordance with staff guidance.
The required information can be submitted to the SEC by email at [email protected] using the subject line "Participating Affiliate." This email address can also be used for submitting amendments to information already submitted.
To learn more about the regulation of investment advisers, see Practice Note, Investment Adviser Regulation: Overview.