[Federal Register Volume 77, Number 94 (Tuesday, May 15, 2012)]
[Rules and Regulations]
[Pages 28476-28477]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-11662]


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SECURITIES AND EXCHANGE COMMISSION

17 CFR Part 275

[Release No. IA-3403; File No. S7-36-10]


Political Contributions by Certain Investment Advisers

AGENCY: Securities and Exchange Commission.

ACTION: Final rule; technical amendment.

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SUMMARY: The Securities and Exchange Commission (``Commission'') is 
making a technical amendment to the definition of ``covered associate'' 
in rule 206(4)-5 under the Investment Advisers Act of 1940 (``Advisers 
Act'') to correct an inadvertent error in the rule as published in the 
Federal Register on July 19, 2011.

DATES: Effective date: May 15, 2012.

FOR FURTHER INFORMATION CONTACT: Vanessa M. Meeks, Attorney-Adviser, or 
Melissa A. Roverts, Branch Chief, at (202) 551-6787 or [email protected], 
Office of Investment Adviser Regulation, Division of Investment 
Management, U.S. Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-8549.

SUPPLEMENTARY INFORMATION:

I. Background

    The Commission adopted rule 206(4)-5 in July 2010 to prohibit an 
investment adviser from providing advisory services for compensation to 
a government client for two years after the adviser or certain of its 
executives or employees (``covered associates'') make a contribution to 
certain elected officials or candidates.\1\ In November 2010, the 
Commission proposed new rules and rule amendments under the Advisers 
Act to implement provisions of the Dodd-Frank Wall Street Reform and 
Consumer Protection Act.\2\ In that release, the Commission also 
proposed several amendments to rule 206(4)-5, including a minor change 
to the rule's definition of a ``covered associate'' to replace the word 
``individual'' with the word ``person.'' \3\ The proposed change would 
have specified that a legal entity, not just a natural person, that is 
a general partner or managing member of an investment adviser would 
meet the definition of ``covered associate.'' \4\
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    \1\ Political Contributions by Certain Investment Advisers, 
Investment Advisers Act Release No. 3043 (July 1, 2010) [75 FR 41018 
(July 14, 2010)].
    \2\ Rules Implementing Amendments to the Investment Advisers Act 
of 1940, Investment Advisers Act Release No. 3110 (Nov. 19, 2010) 
[75 FR 77052 (Dec. 10, 2010)] (``Implementing Proposing Release'').
    \3\ See id. at section II.D.1.
    \4\ Id.
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    In June 2011, the Commission adopted many of the new rules and rule 
amendments set forth in the Implementing Proposing Release, including 
amendments to rule 206(4)-5.\5\ The Commission specified in the 
``Discussion'' section of the Implementing Adopting Release that it was 
not adopting the proposed amendment to the definition of ``covered 
associate,'' i.e., that the definition would continue to use the word 
``individual.'' \6\ However, the text of rule 206(4)-5(f)(2)(i) 
published in the ``Text of Rule and Form Amendments'' section of the 
Implementing Adopting Release, and subsequently in the Federal 
Register, incorrectly reflected the replacement of the word 
``individual'' with the word ``person,'' as though that proposed change 
had been adopted. To correct this mistake, the Commission is making a 
technical amendment to rule 206(4)-5(f)(2)(i) to replace the word 
``person'' with the word ``individual.''
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    \5\ See Rules Implementing Amendments to the Investment Advisers 
Act of 1940, Investment Advisers Act Release No. 3221 (June 22, 
2011) [76 FR 42950 (July 19, 2011)] (``Implementing Adopting 
Release'').
    \6\ Id. at n.340 (``We are not, however, adopting an amendment 
we proposed to specify that a legal entity, not just a natural 
person, that is a general partner or managing member of an 
investment adviser would meet the definition of ``covered 
associate'' in the rule. Upon reflection, it would broaden the 
application of the rule more than we intended.'').
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II. Certain Findings

    Under the Administrative Procedure Act (``APA''), notice of 
proposed rulemaking is not required when an agency, for good cause, 
finds ``that notice and public procedure thereon are impracticable, 
unnecessary, or contrary to the public interest.'' \7\ The Commission 
is making a technical amendment to rule 206(4)-5 to reflect the 
Commission's stated intent in the Implementing Adopting Release. The 
Commission finds that because the amendment is technical and is being 
made solely to correct a mistake, publishing the amendment for comment 
is unnecessary.\8\
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    \7\ 5 U.S.C. 553(b).
    \8\ For similar reasons, the amendment does not require analysis 
under the Regulatory Flexibility Act (``RFA'') or analysis of major 
rule status under the Small Business Regulatory Enforcement Fairness 
Act. See 5 U.S.C. 601(2) (for purposes of RFA analysis, the term 
``rule'' means any rule for which the agency publishes a general 
notice of proposed rulemaking); and 5 U.S.C. 804(3)(C) (for purposes 
of Congressional review of agency rulemaking, the term ``rule'' does 
not include any rule of agency organization, procedure or practice 
that does not substantially affect the rights or obligations of non-
agency parties).
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    The APA also requires publication of a rule at least 30 days before 
its effective date unless the agency finds otherwise for good cause.\9\ 
For the same reasons described above with respect to notice and 
opportunity for comment, the Commission finds that there is good cause 
for this technical amendment to take effect on May 15, 2012.
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    \9\ See 5 U.S.C. 553(d)(3).
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    The amendment the Commission is adopting does not make substantive 
or material modifications to any collection of information requirements 
as defined by the Paperwork Reduction Act of 1995, as amended.\10\
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    \10\ 44 U.S.C. 3501, 3507.
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    The Commission is sensitive to the costs and benefits of its rules. 
The rule amendment the Commission is adopting today is technical and is 
being made solely to correct a mistake and therefore will have minimal, 
if any, economic effect.

III. Statutory Text and Text of Amendment

    We are adopting this technical amendment to rule 206(4)-5 under the 
authority set forth in sections 206(4) and 211(a) of the Advisers 
Act.\11\
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    \11\ 15 U.S.C. 80b-6(4) and 80b-11(a).

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[[Page 28477]]

List of Subjects in 17 CFR Part 275

    Reporting and recordkeeping requirements; Securities.

Text of Amendment

    For the reasons set out in the preamble, Title 17, Chapter II of 
the Code of the Federal Regulations is amended as follows:

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

0
1. The authority for part 275 continues to read in part as follows:

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

0
2. Section 275.206(4)-5 is amended by revising paragraph (f)(2)(i) to 
read as follows:


Sec.  275.206(4)-5  Political contributions by certain investment 
advisers.

* * * * *
    (f) * * *
    (2) * * *
    (i) Any general partner, managing member or executive officer, or 
other individual with a similar status or function;
* * * * *

    Dated: May 8, 2012.
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2012-11662 Filed 5-14-12; 8:45 am]
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