SEC No-Action Relief for Broker-Dealers Relying on Registered Investment Advisers for Anti-Money Laundering Obligations

February 27, 2013

The SEC has
extended a former no-action letter position that permitted broker-dealers to
rely on SEC registered investment advisers to perform its customer
identification obligations for shared customers.  The former position allows broker-dealers to
rely on certain financial institutions to meet customer identification obligations
under Rule 17a-8 of the Securities Exchange Act of 1934 as long as the
institution is subject to an anti-money laundering program regulated by a
federal regulator.

  Even though investment advisers are not
currently subject to an anti-money laundering program, the SEC has provided
no-action relief since 2004 to permit U.S. investment advisers registered under
the Investment Advisers Act to perform customer identification obligations for
broker-dealers, and has, in this
no-action letter
dated January 11, 2013, extended this position for an
additional two years, provided that the investment adviser enters into a
contract in which it agrees to implement its own anti-money laundering program
consistent with the rules of the Treasury Department’s Financial Crimes
Enforcement Network, and annually certify compliance to the broker-dealer. 

Additionally, a
broker-dealer’s reliance on the investment adviser must be reasonable under the
circumstances.  To that end, broker-dealers
must perform due diligence on the investment adviser at the outset of the
relationship and as appropriate throughout., Broker-Dealers should also assess
money laundering risks presented by an investment adviser and its customers based
on the particular facts and circumstances.

If you have previously relied on registered
investment advisers to meet your anti-money laundering obligations, you may
want to check that they are still registered with the SEC and did not changed to
state registration in 2012. 



Anti-Money Laundering, No Action Letters, SEC