The staff of the SEC’s Division of Investment Management provided guidance to the effect that a broker-dealer would not be an investment adviser with respect to clients of an investment manager that used research services provided by the broker‑dealer through a soft-dollar commission pooling arrangement in making investment decisions for those clients’ accounts, provided certain conditions were met. The request for guidance arose out of a concern that if the opposite were true, i.e., the broker-dealers were investment advisers with respect to the clients of investment managers using the broker-dealers’ research services acquired through a soft dollar pooling arrangement, then the broker-dealers would be subject to the restrictions of Section 206(3) of the Investment Advisers Act of 1940 if they engaged in principal transactions with those clients.
Alert
October 05, 2010