October 30, 2017
SEC Grants Relief to Broker-Dealers and Investment Advisers
On October 26, 2017, the SEC released three no-action letters that will provide 30 months relief under the Investment Advisers Act of 1940 for US broker-dealers under the second Markets in Financial Instruments Directive (“MiFID II”). MiFID II is a legislative reform passed by the European Commission that becomes effective in Europe on January 3, 2018. This legislation will potentially impact U.S. asset managers based on the following interactions with European counterparties:
The SEC’s no-action letters are intended to provide guidance for U.S. asset managers involved in any of these relationships or operations. Furthermore, they address recent concerns that advisers will structure trades resulting in certain clients not paying a pro rata share of all costs (such as research costs) associated with aggregated trades.
THE NO-ACTION LETTERS
The SEC’s no-action letters permit the following business activities for U.S. asset managers, provided that the conditions set forth in the respective no-action letters are met:
WHAT DOES THIS MEAN FOR ME?
Fairview® encourages U.S. asset managers to review their (i) internal processes and procedures, (ii) distribution strategies and (iii) relationships with European clients to determine if they are impacted by MiFID II. If so, firms should review the no-action letters to see if these potential risks are addressed. Fairview® will continue to provide updates as more information is made available.