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SEC Extends AML No-Action Letter Allowing Broker-Dealers to Rely on Investment Advisers

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December 18, 2018

Client Alert
The Securities and Exchange Commission (“SEC”) recently issued a no-action letter which allows broker-dealers to rely on investment advisers to perform some or all of their Customer Identification Program (“CIP”) obligations under federal anti-money laundering (“AML”) legislation. This letter extends existing relief granted in 2016 that was set to expire in December of 2018. The 2018 no-action letter, which is the latest in a line of letters dating back to 2004, will expire in December of 2020 or earlier if the AML program rule for investment advisers becomes effective.

Under the no-action letter, a broker-dealer may rely on an SEC-registered investment adviser to perform its CIP obligations and/or beneficial ownership requirements for legal entity customers if the broker-dealer is able to determine that its reliance on the investment adviser is reasonable under the circumstances and it enters into a contract with the investment adviser including provisions that the investment adviser:

A broker-dealer that chooses not to rely on the relief in the no-action letter may still contractually delegate its obligations under the CIP rule and/or beneficial ownership requirements to an investment adviser. However, the broker-dealer will remain solely responsible for assuring compliance with the CIP rule and/or beneficial ownership requirements and therefore, must actively monitor the operation of its CIP and/or beneficial ownership procedures and assess their effectiveness.

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