[Federal Register Volume 64, Number 10 (Friday, January 15, 1999)]
[Rules and Regulations]
[Pages 2566-2567]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-920]


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SECURITIES AND EXCHANGE COMMISSION

17 CFR Part 275

[Release No. IA-1780; File Nos. S7-31-96; S7-7-86]
RIN 3235-AH59


Technical Amendments Under the Investment Advisers Act of 1940

AGENCY: Securities and Exchange Commission.

ACTION: Corrections to final regulations.

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SUMMARY: The Commission is making technical corrections to rules 204-1 
and 202(a)(1)-1 under the Investment Advisers Act of 1940 (``Advisers 
Act''). Rule 204-1 was published Thursday, May 22, 1997 (62 FR 28112), 
under the Investment Advisers Act of 1940 (``Advisers Act''). Rule 204-
1 relates to the investment adviser application for registration with 
the Commission. Rule 202(a)(1)-1 was published on Wednesday, September 
17, 1986 (51 FR 32906), under the Advisers Act. Rule 202(a)(1)-1 
relates to certain transactions not deemed ``assignments'' for purposes 
of section 205 of the Advisers Act.

EFFECTIVE DATE: The rule corrections will become effective on January 
15, 1999.

FOR FURTHER INFORMATION CONTACT: Jeffrey O. Himstreet, Attorney, at 
(202) 942-0533, Task Force on Investment Adviser Regulation, Division 
of Investment Management, Securities and Exchange Commission, 450 Fifth 
Street, N.W., Mail Stop 5-6, Washington, D.C. 20549.

SUPPLEMENTARY INFORMATION:

A. Rule 204-1

    Rule 204-1 sets forth the circumstances that require the filing of 
an amended investment adviser registration form. Last year, the 
Commission adopted amendments to rule 204-1 to require that, among 
other things, an adviser file an amended Schedule I annually within 90 
days of the end of the adviser's fiscal year.\1\ In adopting that 
amendment and renumbering the provisions of the rule, paragraph (d) of 
rule 204-1 was inadvertently omitted from the rule.
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    \1\ See Rules Implementing Amendments to the Investment Advisers 
Act of 1940, Investment Advisers Act Release No. 1633 (May 15, 1997) 
[62 FR 28112 (May 22, 1997)], at section II.I.1.
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    Prior to effectiveness of the implementing rules, rule 204-1(d) \2\ 
stated that every document required to be filed with the Commission 
pursuant to rule 204-1 shall constitute a ``report'' for purposes of 
sections 204 \3\ and 207 \4\ of the Advisers Act. This correction 
restores the language contained originally in paragraph (d) by placing 
this language in new paragraph (c) of rule 204-1.
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    \2\ 17 CFR 275.204-1(d) (1995).
    \3\ 15 U.S.C. 80b-4. Section 204 requires SEC-registered 
advisers generally to ``make and keep for prescribed periods'' 
certain records, to furnish copies of those records as required by 
Commission rule, and to ``make and disseminate such reports as the 
Commission, by rule, may prescribe as necessary or appropriate in 
the public interest or for the protection of investors.'' Section 
204 also grants Commission representatives authority to inspect the 
records of SEC-registered advisers. Id.
    \4\ 15 U.S.C. 80b-7. Section 207 makes it unlawful for any 
person willfully to make any untrue statement of a material fact or 
to omit to state any material fact required to be stated ``in any 
registration application or report'' filed with the Commission under 
section 203 or 204. Id.
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B. Rule 202(a)(1)-1

    Rule 202(a)(1)-1 provides that a transaction that does not result 
in a change of control or management of an adviser is ``not an 
assignment for purposes of section 205(2) of the Act.'' \5\ In 1987, 
Congress amended and renumbered section 205 of the Advisers Act,\6\ 
and, as a result rule 202(a)(1)-1 contains an incorrect reference. The 
Commission is correcting this reference.
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    \5\ 17 CFR 270.202(a)(1)-1. Section 205(2) prohibited certain 
advisers from entering into, extending, or renewing any advisory 
contract that allowed an assignment of the advisory contract without 
consent of the party to the contract. See Section 205 of the 
Advisers Act [15 U.S.C. 80b-5 (1985)].
    \6\ 100 Pub. L. 181, 111 Stat. 1249 (Dec. 4, 1987) (codified in 
scattered sections of 15 U.S.C.). The amendments to section 205 and 
other sections of the federal securities laws also were part of a 
bill to extend authorization of appropriations to the Commission. 
Id. Congress also amended section 205 in 1996, among other reasons, 
to grant the Commission the ability to exempt any person or 
transaction from section 205(a)(1). Pub. L. No. 104-296, 110 Stat. 
3416 (1996).
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II. Certain Findings

    Under the Administrative Procedure Act (``APA''), notice of 
proposed rulemaking is not required when the agency for good cause 
finds ``that notice

[[Page 2567]]

and public procedure thereon are impracticable, unnecessary, or 
contrary to the public interest.'' \7\ Because these technical 
amendments adopted today merely corrects the inadvertent omission of 
paragraph (d) of rule 204-1, and make a technical, conforming amendment 
to rule 202(a)(1)-1, the Commission finds that publishing the amendment 
for comment is unnecessary.
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    \7\ 5 U.S.C. 553(b).
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    Regarding rule 204-1, when the Commission proposed amendments to 
rule 204-1 in 1996, it did not propose to delete paragraph (d) of rule 
204-1.\8\ It thus appears unlikely that any commenter considered the 
deletion of paragraph (d) of rule 204-1 at any time during the comment 
period. Finally, if these changes to rule 204-1 were delayed to allow 
for notice and opportunity for comment, there may be confusion among 
advisers regarding whether an amendment to Form ADV would be considered 
a ``report'' for purposes of sections 204 and 207 of the Advisers Act.
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    \8\ See Rules Implementing Amendments to the Investment Advisers 
Act of 1940, Investment Advisers Act Release No. 1601 (Dec. 20, 
1996) [61 FR 68480 (Dec. 27, 1996)].
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    Publication of a substantive rule not less than 30 days before its 
effective date is required by the APA except as otherwise provided by 
the agency for good cause.\9\ For the same reasons as described above 
with respect to notice and opportunity for comment, the Commission 
finds that there is good cause for having these correcting amendments 
become effective on January 15, 1999.
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    \9\ 5 U.S.C. 553(d).
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List of Subjects in 17 CFR Part 275

    Reporting and recordkeeping requirements, Securities.

PART 275--RULES AND REGULATIONS, INVESTMENT ADVISERS ACT OF 1940

    Accordingly, 17 CFR part 275 is corrected by making the following 
correcting amendments:
    1. The authority citation for part 275 continues to read in part as 
follows:

    Authority: 15 U.S.C. 80b-2(a)(17), 80b-3, 80b-4, 80b-6(4), 80b-
6a, 80b-11, unless otherwise noted.
* * * * *


Sec. 275.202  [Amended]

    2. In Sec. 275.202(a)(1)-1, following the word ``section,'' the 
reference to ``205(2)'' is corrected to read ``205(a)(2)''.
    3. In Sec. 275.204-1, add paragraph (c) to read as follows:


Sec. 275.204-1.  Amendments to application for registration.

* * * * *
    (c) Every document required pursuant to this section shall 
constitute a ``report'' within the meaning of sections 204 and 207 of 
the Act [15 U.S.C. 80b-4, 80b-7].

    By the Commission.

    Dated: January 7, 1999.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 99-920 Filed 1-14-99; 8:45 am]
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