Alert January 04, 2011

SEC Extends Sunset Period of Rule 206(3)-3T to December 31, 2012

The SEC issued a release announcing the extension of the sunset period for Rule 206(3)‑3T from December 31, 2010 to December 31, 2012.  Rule 206(3)‑3T was adopted as a temporary rule in 2007 following a decision by the Court of Appeals for the District of Columbia Circuit that struck down an SEC rule addressing the application of the Advisers Act to certain activities of broker-dealers (see the April 10, 2007 Alert for a discussion of this decision).

Rule 206(3)-3T is designed to enable a dually registered broker-dealer’s nondiscretionary customers that have converted their current fee-based brokerage accounts to fee-based advisory accounts to have continued access to securities available on a principal basis from the firm without requiring the firm to comply with the strict terms of the disclosure and consent requirements under Section 206(3) of the Investment Advisers Act of 1940.  The SEC indicated that it anticipates revisiting the Rule soon after it completes a study of the obligations of broker-dealers and investment advisers mandated under Section 913 of the Dodd-Frank Act (with a report based on the study to be submitted to Congress no later than January 21, 2011) and that rulemaking in this area will take into account not only on the study but also on the SEC’s broader view of regulatory requirements applicable to broker‑dealers and investment advisers.