SEC Staff Grants No-Action Relief From Advisers Act Registration Requirements to U.S. Asset Management Subsidiary of Foreign Financial Institution

July 07, 2011
The Staff of the U.S. Securities and Exchange Commission has granted no-action relief from the registration requirements under the Investment Advisers Act of 1940, as amended (the “Advisers Act.”), to a U.S. asset management subsidiary of a non-U.S. financial institution.1 The U.S. subsidiary previously could have relied on the “private adviser” exemption in Section 203(b)(3) of the Advisers Act, which was eliminated by the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”).


The subsidiary is wholly owned by a foreign insurance company. The subsidiary provides investment management services solely to foreign funds in which its parent is the only investor. The subsidiary does not hold itself out to the public as an investment adviser and does not provide, and does not intend to provide in the future, investment advisory services to any third party.

Section 202(a)(11) of the Advisers Act defines “investment adviser” to mean “any person who, for compensation, engages in the business of advising others, either directly or through publications or writings, as to the value of securities or as to the advisability of investing in, purchasing, or selling securities, or who, for compensation and as part of a regular business, issues or promulgates analyses or reports concerning securities.” (Emphasis supplied.) The no-action request letter (which was submitted by this firm) argued, based on the Staff's prior positions, that the subsidiary was not an “investment adviser” because it was not in the business of “advising others.” On June 30, 2011, the Staff of the SEC’s Division of Investment Management provided the requested assurance that it would not recommend enforcement action if the subsidiary did not register as an investment adviser under the Advisers Act.

The facts of the no-action letter are narrow.2 Nonetheless, the no-action letter may be of utility to asset management subsidiaries of U.S. or non-U.S. financial institutions, including potentially sovereign wealth funds. It also may signal a degree of flexibility by the SEC Staff in dealing with the unintended consequences of Dodd-Frank.


For assistance, please contact the following lawyers in the Financial Services Area:

Paul B. Raymond, Partner, Investment Management, 617.951.8567

Roger P. Joseph, Practice Group Leader, Investment Management; Co-chair, Financial Services Area, 617.951.8247

Satoru Murase, Partner, Japanese Practice, 212.705.7854

Hisayo Yasuda, Partner, Investment Management, 81.3.6721.3141

Edwin E. Smith, Partner, Financial Restructuring; Co-chair, Financial Services Area, 617.951.8615

1 SEC Staff No-Action Letter (Jun. 30, 2011).
2 The SEC Staff notes in the no-action letter that the relief would not apply to a parent company which itself is a private fund as defined in Section 202(a)(29) of the Advisers Act. 

This article was originally published by Bingham McCutchen LLP.