The SEC recently issued a No-Action Letter that extends the ability for a broker-dealer to treat an investment adviser as if it were subject to an Anti-Money Laundering Program (AML Program) and rely on the investment adviser to perform some or all of its customer identification program (CIP) obligations under rule 31 CRF 103.122. However, in response to FinCEN and SEC concerns about renewing the No-Action relief beyond January 10, 2011, the SEC imposed additional conditions on broker-dealers who rely on the CIP of investment advisers. Historically, the primary conditions imposed on a broker-dealer relying on no-action relief was the belief that reliance was reasonable under the circumstances and the investment adviser relied-upon was contractually required to certify annually to the broker-dealer that it has implemented an AML Program, and that it (or its agent) would perform the specified requirements of the CIP.

Courtesy of the LeGaye Law Firm

Michael Schaps, Co-Author

Daniel E. LeGaye, Co-Author