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Extension of SIFMA No-Action Letter

Summary

SIFMA and SIFMA AMG agree with the recommendations of the SEC Investor Advisory Committee at its July 25, 2019 meeting – and would like to formally request – that the staff of the Division of Investment Management act quickly to extend the temporary no-action relief issued to SIFMA on October 26, 2017 (“SIFMA No-Action Letter”) until July 3, 2023.

We continue to believe it is critical for the Securities and Exchange Commission (“SEC”) to provide permanent relief to allow broker-dealers to charge separately or receive cash payments for research provided to investment managers and other institutional investors without the broker-dealers being deemed investment advisers subject to the Investment Advisers Act of 1940 (“Advisers Act”).

Extending the SIFMA No-Action Letter, which is set to expire on July 3, 2020, for three additional years will provide the SEC with more time to evaluate market developments, provide important certainty to market participants, and avoid the consequences of allowing the SIFMA No-Action Letter to expire.

PDF

Submitted To

SEC

Submitted By

SIFMA and SIFMA AMG

Related Committee(s)

  • Asset Management

Date

2

August

2019

Excerpt

Dalia Blass, Director
Division of Investment Management
U.S. Securities and Exchange Commission
100 F Street, NE
Washington, DC 20549

Paul Cellupica, Deputy Director/Chief Counsel
Division of Investment Management
U.S. Securities and Exchange Commission
100 F Street, NE
Washington, DC 20549

Re: Extension of SIFMA No-Action Letter

Dear Ms. Blass and Mr. Cellupica,

The Securities Industry and Financial Markets Association (“SIFMA”) and the SIFMA Asset Management Group (“SIFMA AMG”)1 agree with the recommendations of the SEC Investor Advisory Committee at its July 25, 2019 meeting – and would like to formally request – that the staff of the Division of Investment Management act quickly to extend the temporary no-action relief issued to SIFMA on October 26, 2017 (“SIFMA No-Action Letter”)2 until July 3, 2023. We continue to believe it is critical for the Securities and Exchange Commission (“SEC”) to provide permanent relief to allow broker-dealers to charge separately or receive cash payments for research provided to investment managers and other institutional investors without the broker-dealers being deemed investment advisers subject to the Investment Advisers Act of 1940 (“Advisers Act”). Extending the SIFMA No-Action Letter, which is set to expire on July 3, 2020, for three additional years will provide the SEC with more time to evaluate market developments, provide important certainty to market participants, and avoid the consequences of allowing the SIFMA No-Action Letter to expire. We elaborate on each of these key points below.

Provide More Time to Evaluate Market Developments

The SIFMA No-Action Letter was precipitated by the need to address dislocations caused by the then-pending effectiveness of MiFID II’s3 restrictions on inducements, including research, which require investment managers to pay for research out of their own assets, through a research payment account utilizing customer funds (“RPA”), or through a combination of the two, and require broker-dealers to accept such payments. The SEC staff chose to provide relief that is limited as to both its duration (30 months) and its scope (providing relief only for dealings with investment managers subject to MiFID II directly or by contractual obligation), while at the same time allowing the staff time to understand better the evolution of business practices and the impact on the research marketplace and market participants.4 Extending the SIFMA No-Action Letter would allow more time for the SEC and its staff to consider the continuing regulatory and market developments both in Europe and in the US.

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