[Federal Register Volume 82, Number 233 (Wednesday, December 6, 2017)]
[Notices]
[Pages 57639-57641]
[FR Doc No: 2017-26222]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82189; File No. SR-FINRA-2017-034]

Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change Relating to the Trade Reporting Facility Limited
Liability Company Agreements

November 30, 2017.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on November 21, 2017, Financial Industry Regulatory Authority, Inc.
(``FINRA'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by FINRA. FINRA has
designated the proposed rule change as concerned solely with the
administration of the self-regulatory organization under Section
19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-4(f)(3) thereunder,\4\
which renders the proposal effective upon receipt of this filing by the
Commission. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 17 CFR 240.19b-4(f)(3).
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of the
Substance of the Proposed Rule Change

    FINRA is proposing to make technical changes to FINRA's Trade
Reporting Facility limited liability company agreements, as they appear
in the FINRA Manual, to reflect the second amendment and restatement of
such agreements.
    The text of the proposed rule change is available on FINRA's Web
site at http://www.finra.org, at the principal office of FINRA and at
the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, FINRA included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. FINRA has prepared summaries, set forth in sections A,
B, and C below, of the most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The FINRA Trade Reporting Facilities (``TRFs'') are facilities that
FINRA members use to report over-the-counter (``OTC'') transactions in
NMS stocks in accordance with FINRA rules. There currently are two
TRFs: The FINRA/Nasdaq TRF and the FINRA/NYSE TRF.\5\ The operation of
each TRF is

governed by a Limited Liability Company Agreement (the ``TRF LLC
Agreement'') between FINRA and the respective ``Business Member,'' each
of which is itself an affiliate of a self-regulatory organization
(``SRO''). The TRF LLC Agreements, which were submitted as part of the
rule filings to establish the respective TRFs and were subsequently
amended and restated,\6\ appear in the FINRA Manual.
---------------------------------------------------------------------------

    \5\ The establishment of each TRF was subject to a proposed rule
change filed with the Commission. See Securities Exchange Act
Release No. 54084 (June 30, 2006), 71 FR 38935 (July 10, 2006)
(Order Approving File No. SR-NASD-2005-087); and Securities Exchange
Act Release No. 55325 (February 21, 2007), 72 FR 8820 (February 27,
2007) (Notice of Filing and Immediate Effectiveness of File No. SR-
NASD-2007-011).
    \6\ See Securities Exchange Act Release No. 62064 (May 10,
2010), 75 FR 27606 (May 17, 2010) (Notice of Filing and Immediate
Effectiveness of File No. SR-FINRA-2010-020).
---------------------------------------------------------------------------

    Under each TRF LLC Agreement, FINRA is the ``SRO Member'' and has
sole regulatory responsibility for the TRF, including real-time
monitoring and T+1 surveillance, development and enforcement of trade
reporting rules and submission of proposed rule changes to the
Commission. The Business Member under each TRF LLC Agreement is
primarily responsible for the management of the TRF's business affairs,
which may not be conducted in a manner inconsistent with the regulatory
and oversight functions of FINRA. Among other things, the Business
Member establishes pricing for the TRF and is obligated to pay the cost
of regulation and is entitled to the profits and losses, if any,
derived from operation of the TRF. The Business Member also provides
the ``user facing'' front-end technology used to operate the TRF and
transmit in real time trade report data directly to the NMS securities
information processors (``SIPs'') and to FINRA for audit trail
purposes.
    FINRA and the TRF Business Members recently executed second amended
and restated TRF LLC Agreements to reflect the change in name of each
Business Member. Specifically, the FINRA/Nasdaq TRF Business Member,
formerly NASDAQ OMX Group, Inc., is now known as Nasdaq, Inc., and the
FINRA/NYSE TRF Business Member, formerly NYSE Market, Inc., is now
known as NYSE Market (DE), Inc.
    As part of the second amended and restated TRF LLC Agreements,
FINRA and the Business Members also updated the schedules relating to
the respective TRF officers and directors. Schedule C of each TRF LLC
Agreement is the management agreement that all TRF directors must
sign.\7\ Rather than reflect the executed version of the management
agreement, Schedule C of each TRF LLC Agreement now reflects the form
of management agreement only and new Schedule E of each TRF LLC
Agreement specifically identifies the directors of the TRF (each of
whom, as noted above, is required to sign the management agreement that
appears at Schedule C). Schedule D of each TRF LLC Agreement identifies
the officers of the TRF and was updated as part of the second amended
and restated agreement. Also as part of the second amendment and
restatement of the agreements, FINRA and the Business Members revised
Section 27 of each TRF LLC Agreement to expressly provide that the
parties may update Schedules D and E from time to time by notice,
without also needing to amend and restate the TRF LLC Agreement.
---------------------------------------------------------------------------

    \7\ Pursuant to each TRF LLC Agreement, the TRF board of
directors is comprised of three directors. The Business Member is
entitled to designate two directors and the SRO Member is entitled
to designate one director.
---------------------------------------------------------------------------

    FINRA is proposing to make technical changes to the TRF LLC
Agreements, as they appear in the FINRA Manual, to reflect the second
amended and restated TRF LLC Agreements.\8\ The terms and conditions of
the second amended and restated TRF LLC Agreements are identical to
those of the first amended and restated TRF LLC Agreements.
---------------------------------------------------------------------------

    \8\ FINRA also is proposing a conforming change to Rule 7640A(a)
(Data Products Offered by NASDAQ) to reflect the change in name from
The NASDAQ OMX Group, Inc. to Nasdaq, Inc.
---------------------------------------------------------------------------

    In addition, because the parties may update Schedules D and E from
time to time, without needing to also amend and restate the TRF LLC
Agreements, FINRA is proposing to provide the current schedules--with
the current lists of TRF officers and directors--on FINRA's public Web
site, rather than in the FINRA Manual.\9\ FINRA believes that this
would obviate the need to submit a proposed rule change each time there
is a change in the officers or directors of the TRF. Thus, in lieu of
reflecting the schedules themselves, the FINRA Manual will provide that
FINRA maintains current Schedules D and E on its public Web site. FINRA
will post the current Schedules D and E promptly upon the filing of the
proposed rule change and going forward will promptly update its Web
site to reflect any future updates to the Schedules.
---------------------------------------------------------------------------

    \9\ FINRA anticipates that the current schedules will be
accessible from the TRF page of the FINRA public Web site: http://www.finra.org/industry/trf.
---------------------------------------------------------------------------

    Set forth in the table below is a current list of FINRA/Nasdaq TRF
officers and directors, as reflected in Schedules D and E,
respectively, of the FINRA/Nasdaq TRF LLC Agreement:

------------------------------------------------------------------------
                   Name                                 Title
------------------------------------------------------------------------
                  Officers of The FINRA/Nasdaq TRF LLC
------------------------------------------------------------------------
Paul Roland...............................  President
Joan C. Conley............................  Secretary
Peter Strandell...........................  Treasurer
Michael Caramico..........................  Assistant Treasurer
Amy Kohn..................................  Vice President
------------------------------------------------------------------------
                  Directors of The FINRA/Nasdaq TRF LLC
------------------------------------------------------------------------
John Zecca (designated by the Business Member)
Tal Cohen (designated by the Business Member)
Thomas Gira (designated by the SRO Member)
------------------------------------------------------------------------

    Set forth in the table below is a current list of FINRA/NYSE TRF
officers and directors, as reflected in Schedules D and E,
respectively, of the FINRA/NYSE TRF LLC Agreement:

------------------------------------------------------------------------
                   Name                                 Title
------------------------------------------------------------------------
                   Officers of The FINRA/NYSE TRF LLC
------------------------------------------------------------------------
Robert Hill...............................  President
Scott Hill................................  Chief Financial Officer
Doug Foley................................  Senior Vice President
Karen Lorentz.............................  Vice President
Martin Hunter.............................  Senior Vice President, Tax &
                                             Treasury
Elizabeth King............................  General Counsel & Secretary
Martha Redding............................  Assistant Secretary
Andrew Surdykowski........................  Assistant Secretary
Sandra Kerr...............................  Senior Tax Director
David Nevin...............................  Senior Treasury Director
------------------------------------------------------------------------
                   Directors of The FINRA/NYSE TRF LLC
------------------------------------------------------------------------
Paul Adcock (designated by the Business Member)
Robert Hill (designated by the Business Member)
Thomas Gira (designated by the SRO Member)
------------------------------------------------------------------------

    As noted above, current Schedules D and E will be posted on FINRA's
public Web site and will not appear in the FINRA Manual. Going forward,
changes to these schedules will only be reflected on FINRA's public Web
site.
    FINRA has filed the proposed rule change for immediate
effectiveness. The effective date will be the date of filing
2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the
provisions of Section 15A(b)(6) of the Act,\10\ which requires, among
other things, that FINRA rules must be designed to prevent fraudulent
and manipulative

acts and practices, to promote just and equitable principles of trade,
and, in general, to protect investors and the public interest. FINRA
believes that the proposed rule change will enhance the information
available to members and the public regarding FINRA's TRF LLC
Agreements in that the current agreements will be reflected in the
FINRA manual and updated Schedules D and E will be readily available on
FINRA's public Web site. Thus, the proposed rule change will ensure
that the most current information regarding the TRF LLC Agreements will
be readily available to members and the public.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78o-3(b)(6).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    FINRA does not believe that the proposed rule change will result in
any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act. The proposed rule change makes
technical changes to the TRF LLC Agreements, as they appear in the
FINRA Manual, to reflect the second amended and restated agreements
executed by the parties. The terms and conditions of the TRF LLC
Agreements have not changed. Accordingly, FINRA does not believe that
there are any material economic impacts associated with the proposed
rule change.

C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others

    Written comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action

    The foregoing rule change has become effective pursuant to Section
19(b)(3)(A) of the Act \11\ and paragraph (f)(3) of Rule 19b-4
thereunder.\12\ At any time within 60 days of the filing of the
proposed rule change, the Commission summarily may temporarily suspend
such rule change if it appears to the Commission that such action is
necessary or appropriate in the public interest, for the protection of
investors, or otherwise in furtherance of the purposes of the Act. If
the Commission takes such action, the Commission shall institute
proceedings to determine whether the proposed rule should be approved
or disapproved.
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-4(f)(3).
---------------------------------------------------------------------------

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include
File Number SR-FINRA-2017-034 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-FINRA-2017-034. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549 on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available
for inspection and copying at the principal office of FINRA. All
comments received will be posted without change. Persons submitting
comments are cautioned that we do not redact or edit personal
identifying information from comment submissions. You should submit
only information that you wish to make available publicly. All
submissions should refer to File Number SR-FINRA-2017-034, and should
be submitted on or before December 27, 2017.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
---------------------------------------------------------------------------

    \13\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-26222 Filed 12-5-17; 8:45 am]
BILLING CODE 8011-01-P


U.S. EPA.  1998.  Reregistration Eligibility Decision (RED): Zinc
Phosphide, Office of

Prevention, Pesticides and Toxic Substances.

U.S. EPA.  1979.  EPA stops sale of several electromagnetic insect and
rodent repellers.  EPA

(Environmental News( press release, April 2, 1979, 3 pp.

U.S. EPA.  1999, and 2001.  Proprietary data.

Whisson, D.A.  1998.  Modified bait stations for California ground
squirrel control in endangered

kangaroo rat habitat.  Pages 233-235 In: Baker, R.O. and Crabb, A.C.
(Eds.), Proceedings: Eighteenth Vertebrate Pest Conference, 18,
University of California at Davis, CA.

Wiley, J.S.  1946.  Recent developments in murine typhus fever control.
American Journal of

Public Health, 36 (9):974-983.

XI.  List of Contributors

Angel Chiri, U.S. EPA, OPP, Biological and Economic Analysis Division

William Jacobs, U.S. EPA, OPP, Registration Division

Jonathan Becker, U.S. EPA, OPP, Biological and Economic Analysis
Division

Tim Kiely, U.S. EPA, OPP, Biological and Economic Analysis Division

Kelly White, U.S. EPA, OPP, Special Review and Reregistration Division

Laura Parsons, U.S. EPA, OPP, Special Review and Reregistration Division

William Gross, U.S. EPA, OPP, Biological and Economic Analysis Division

1 In addition to brodifacoum, bromadiolone, bromethalin,
chlorophacinone, diphacinone, the 1998 Rodenticide Cluster RED also
presented EPA(s reregistration decision for pival and its sodium salt,
which were not supported and, therefore, determined to be ineligible for
re-registration.

 The U.S. EPA does not normally classify products for general use;
products that are not restricted remain unclassified. See 40 CFR
152.160(a).

 PAGE  1


[Federal Register Volume 81, Number 235 (Wednesday, December 7, 2016)]
[Notices]
[Pages 88294-88297]
[FR Doc No: 2016-29297]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. IA-4578; File No. 803-00236]

Merrill Lynch, Pierce, Fenner & Smith Incorporated; Notice of
Application

December 1, 2016.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of application for an exemptive order under section 206A
of the Investment Advisers Act of 1940 (``Advisers Act'') providing an
exemption from the written disclosure and consent requirements of
section 206(3).

-----------------------------------------------------------------------

    Applicant: Merrill Lynch, Pierce, Fenner & Smith Incorporated
(``Applicant'').
    Relevant Advisers Act Sections: Exemption requested under section
206A from the written disclosure and consent requirements of section
206(3).
    Summary of Application: Applicant requests that the Commission
issue an order under section 206A exempting it and Future Advisers (as
defined below) from the written disclosure and consent requirements of
section 206(3) with respect to principal transactions with
nondiscretionary advisory client accounts.
    Filing Dates: The application was filed on November 23, 2016.
    Hearing or Notification of Hearing: An order granting the requested
relief will be issued unless the Commission orders a hearing.
Interested persons may request a hearing by writing to the Commission's
Secretary and serving Applicant with a copy of the request, personally
or by mail. Hearing requests should be received by the Commission by
5:30 p.m. on December 27, 2016, and should be accompanied by proof of
service on Applicant, in the form of an affidavit or, for lawyers, a
certificate of service. Pursuant to rule 0-5 under the Advisers Act,
hearing requests should state the nature of the writer's interest, any
facts bearing upon the desirability of a hearing on the matter, the
reason for the request, and the issues contested. Persons who wish to
be notified of a hearing may request notification by writing to the
Commission's Secretary.

ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F
Street NE., Washington, DC 20549-1090. Applicant, Mackenzie E. Crane,
Esq., Bank of America, 100 Federal Street, MA5-100-03-09, Boston, MA
02110 or James E. Anderson, Esq. and Kimberly B. Saunders, Esq.,
Willkie Farr & Gallagher LLP, 1875 K Street NW., Washington, DC 20006.

FOR FURTHER INFORMATION CONTACT: Robert Shapiro, Senior Counsel, at
(202) 551-7758 (Chief Counsel's Office, Division of Investment
Management) or Melissa Harke, Senior Special Counsel, at<PHONE_NUMBER>
(Investment Adviser Regulation Office, Division of Investment
Management).

SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained via the
Commission's Web site at http://www.sec.gov/rules/iareleases.shtml or
by calling<PHONE_NUMBER>.
    Applicant seeks relief from the written disclosure and consent
requirements of section 206(3) of the Advisers Act that would be
similar to relief currently provided by Advisers Act rule 206(3)-3T
(the ``Rule''), which will expire by its terms on December 31, 2016.
The relief sought by Applicant, if granted, would be subject to
conditions similar to those under the Rule, as well as certain revised
or additional conditions.

Applicant's Representations

    1. The Applicant is registered as an investment adviser with the
Commission and is a registered broker-dealer. The Applicant is a
subsidiary of Bank of America Corporation, a diversified financial
services company with operations around the world. The Applicant offers
a number of advisory programs, including Merrill Lynch Personal Advisor
(``MLPA''), a nondiscretionary advisory program, and Merrill Lynch
Investment Advisory Program (``MLIAP''). While the Applicant offers
both discretionary and nondiscretionary advisory services under MLIAP,
the relief sought by the Applicant, as it relates to MLIAP, is limited
to the client accounts enrolled in nondiscretionary strategies.
    2. In 2007, many of the Applicant's fee-based brokerage accounts
were converted to nondiscretionary advisory accounts in MLPA, following
the invalidation of former rule 202(a)(11)-1 under the Advisers Act.
When these accounts had been fee-based brokerage accounts, the
Applicant, in its capacity as a broker-dealer, engaged in principal
transactions with its customers, in accordance with applicable law. The
Applicant currently relies on the Rule to engage in principal
transactions with its client accounts in MLPA and client accounts
enrolled in nondiscretionary strategies in MLIAP.
    3. The Applicant currently has approximately 393,535 client
accounts enrolled in nondiscretionary strategies in MLIAP. Those
accounts have approximately $157 billion in assets under management as
of June 30, 2016. In the period January 1, 2015 through December 31,
2015, there were approximately 53.9 million trades in MLIAP, involving
approximately $79.1 billion in securities. In the period January 1,
2015 through December 31, 2015, 25,114 trades were effected in reliance
on the Rule in 5,978 unique accounts, representing an approximate
average of 4.2 such trades per account. Approximately 70 percent of the
trades done in reliance on the Rule in this period were purchases by
client accounts; the average purchase was approximately $55,850.
Approximately 30 percent of the trades done in reliance on the Rule in
this period were sales from client accounts; the average sale was
approximately $41,504.
    4. In 2013, the Applicant began transitioning its investment
advisory client accounts from five legacy investment advisory programs,
including MLPA, to MLIAP. The Applicant currently has approximately
3,239 client accounts remaining in MLPA. Those accounts have
approximately $5.5 billion in assets under management as of June 30,
2016. It is expected that these client accounts will either transition
to MLIAP or terminate their investment advisory relationship with the
Applicant, at which point MLPA will be retired. In the period January
1, 2015 through December 31, 2015, there were approximately 675,000
trades in MLPA, involving approximately $13 billion in securities. In
the period January 1, 2015 through December 31, 2015, 11,400 trades
were effected in reliance on the Rule in 2,857 unique accounts,
representing an approximate average of 4 such trades per account.
Approximately 70 percent of the trades done in reliance on the Rule in
this period were purchases by client accounts; the average purchase was
approximately $77,600. Approximately 30 percent of the trades done in
reliance on the Rule in this period were sales from client accounts;
the average sale was approximately $77,517.
    5. From January 1, 2015 to December 31, 2015, Applicant did not
rely on the Rule for any principal trades in securities it underwrote.
Any principal transactions in securities that are underwritten by the
Applicant are effected in accordance with section 206(3) of the
Advisers Act.
    6. The Applicant acknowledges that the Order, if granted, would not
be construed as relieving in any way the Applicant from acting in the
best interests of an advisory client, including fulfilling the duty to
seek the best execution for the particular transaction for the advisory
client; nor shall it relieve the Applicant from any obligation that may
be imposed by sections 206(1) or (2) of the Advisers Act or by other
applicable provisions of the federal securities laws or applicable
FINRA rules.

Applicant's Legal Analysis

    1. Section 206(3) provides that it is unlawful for any investment
adviser, directly or indirectly, acting as principal for its own
account, knowingly to sell any security to or purchase any security
from a client, without disclosing to the client in writing before the
completion of the transaction the capacity in which the adviser is
acting and obtaining the client's consent to the transaction. Rule
206(3)-3T deems an investment adviser to be in compliance with the
provisions of section 206(3) of the Advisers Act when the investment
adviser, or a person controlling, controlled by, or under common
control with the investment adviser, acting as principal for its own
account, sells to or purchases from an advisory client any security,
provided that the investment adviser complies with the conditions of
the Rule.
    2. Rule 206(3)-3T requires, among other things, that the investment
adviser obtain a client's written, revocable consent prospectively
authorizing the adviser, directly or indirectly, acting as principal
for its own account, to sell any security to or purchase any security
from the client. The consent must be obtained after the adviser
provides the client with written disclosure about: (i) The
circumstances under which the investment adviser may engage in
principal transactions with the client; (ii) the nature and
significance of the conflicts the investment adviser has with its
client's interests as a result of those transactions; and (iii) how the
investment adviser addresses those conflicts. The investment adviser
also must provide trade-by-trade disclosure to the client, before the
execution of each principal transaction, of the capacity in which the
adviser may act with respect to the transaction, and obtain the
client's consent (which may be written or oral) to the transaction. The
Rule is available only to an

investment adviser that is also a broker-dealer registered under
section 15 of the Securities Exchange Act of 1934 (``Exchange Act'')
and may only be relied upon with respect to a nondiscretionary account
that is a brokerage account subject to the Exchange Act, and the rules
thereunder, and the rules of the self-regulatory organization(s) of
which it is a member. Rule 206(3)-3T is not available for principal
transactions if the investment adviser or a person who controls, is
controlled by, or is under common control with the adviser (``control
person'') is the issuer or is an underwriter of the security, except
that an adviser may rely on the Rule for trades in which the adviser or
a control person is an underwriter of non-convertible investment-grade
debt securities.
    3. The investment adviser also must provide to the client a trade
confirmation that, in addition to the requirements of rule 10b-10 under
the Exchange Act, includes a conspicuous, plain English statement
informing the client that the investment adviser disclosed to the
client before the execution of the transaction that the investment
adviser may act as principal in connection with the transaction, that
the client authorized the transaction, and that the investment adviser
sold the security to or bought the security from the client for its own
account. The investment adviser also must deliver to the client, at
least annually, a written statement listing all transactions that were
executed in the account in reliance on the Rule, including the date and
price of each transaction.
    4. Rule 206(3)-3T is scheduled to expire on December 31, 2016. Upon
expiration, the Applicant would be required to provide trade-by-trade
written disclosure to each nondiscretionary advisory client with whom
the Applicant sought to engage in a principal transaction in accordance
with section 206(3). The Applicant submits that its nondiscretionary
clients, through the Applicant's current reliance on the Rule, have had
access to the Applicant's inventory through principal transactions for
a number of years, and expect to continue to have such access in the
future. The Applicant believes that engaging in principal transactions
with its clients provides certain benefits to its clients, including
access to securities of limited availability, such as municipal bonds,
and that the written disclosure requirement of section 206(3) acts as
an operational barrier to its ability to engage in principal trades
with its clients, especially when the transaction involves securities
of limited availability.
    5. Unless the Applicant is provided an exemption from the written
disclosure and client consent requirements of section 206(3), Applicant
believes that it will be unable to provide the same range of services
and access to the same types of securities to its nondiscretionary
advisory clients as it currently is able to provide to clients under
the Rule.
    6. The Applicant notes that, if the requested relief is granted, it
will remain subject to the fiduciary duties that are generally
enforceable under sections 206(1) and 206(2) of the Advisers Act,
which, in general terms, require the Applicant to: (i) Disclose
material facts about the advisory relationship to its clients; (ii)
treat each client fairly; and (iii) act only in the best interests of
its client, disclosing conflicts of interest when present and obtaining
client consent to arrangements that present such conflicts.
    7. The Applicant further notes that, in its capacity as a broker-
dealer with respect to these accounts, it will remain subject to a
comprehensive set of Commission and FINRA regulations that apply to the
relationship between a broker-dealer and its customer in addition to
the fiduciary duties an adviser owes a client. These rules require,
among other things, that the Applicant deal fairly with its customers,
seek to obtain best execution of customer orders, and make only
suitable recommendations. These obligations are designed to promote
business conduct that protects customers from abusive practices that
may not necessarily be fraudulent, and to protect against unfair prices
and excessive commissions. Specifically, these provisions, among other
things, require that the prices charged by the Applicant be reasonably
related to the prevailing market, and limit the commissions and mark-
ups the Applicant can charge. Additionally, these obligations require
that the Applicant have a reasonable basis to believe that a
recommended transaction or investment strategy involving a security or
securities is suitable for the customer, based on information obtained
through reasonable diligence.
    8. The Applicant requests that the Commission issue an Order
pursuant to section 206A exempting it from the written disclosure and
consent requirements of section 206(3) only with respect to client
accounts in MLPA, nondiscretionary strategies in MLIAP, and any similar
nondiscretionary program to be created in the future. The Applicant
also requests that the Commission's Order apply to future investment
advisers controlling, controlled by, or under common control with the
Applicant (``Future Advisers''). Any Future Adviser relying on any
Order granted pursuant to the application will comply with the terms
and conditions stated in the application.\1\
---------------------------------------------------------------------------

    \1\ All entities that currently intend to rely on any order
granted pursuant to the application are named as Applicants.
---------------------------------------------------------------------------

Applicant's Conditions

    The Applicant agrees that any Order granting the requested relief
will be subject to the following conditions:
    1. The investment adviser will exercise no ``investment
discretion'' (as such term is defined in section 3(a)(35) of the
Exchange Act), except investment discretion granted by the advisory
client on a temporary or limited basis,\2\ with respect to the client's
account.
---------------------------------------------------------------------------

    \2\ Discretion is considered to be temporary or limited for
purposes of this condition when the investment adviser is given
discretion: (i) As to the price at which or the time to execute an
order given by a client for the purchase or sale of a definite
amount or quantity of a specified security; (ii) on an isolated or
infrequent basis, to purchase or sell a security or type of security
when a client is unavailable for a limited period of time not to
exceed a few months; (iii) as to cash management, such as to
exchange a position in a money market fund for another money market
fund or cash equivalent; (iv) to purchase or sell securities to
satisfy margin requirements; (v) to sell specific bonds and purchase
similar bonds in order to permit a client to take a tax loss on the
original position; (vi) to purchase a bond with a specified credit
rating and maturity; and (vii) to purchase or sell a security or
type of security limited by specific parameters established by the
client. See, e.g., Temporary Rule Regarding Principal Trades with
Certain Advisory Clients, Investment Advisers Act Release No. 2653
(Sept. 24, 2007) at n. 31.
---------------------------------------------------------------------------

    2. The investment adviser will not trade in reliance on this Order
any security for which the investment adviser or any person
controlling, controlled by, or under common control with the investment
adviser is the issuer, or, at the time of the sale, an underwriter (as
defined in section 202(a)(20) of the Advisers Act).
    3. The investment adviser will not directly or indirectly require
the client to consent to principal trading as a condition to opening or
maintaining an account with the investment adviser.
    4. The advisory client has executed a written revocable consent
prospectively authorizing the investment adviser directly or indirectly
to act as principal for its own account in selling any security to or
purchasing any security from the advisory client. The advisory client's
written consent must be obtained through a signature or other positive
manifestation of consent that is separate from or in addition to the
signature indicating the client's consent to the advisory agreement.
The separate

or additional signature line or alternative means of expressing consent
must be preceded immediately by prominent, plain English disclosure
containing either: (a) An explanation of: (i) The circumstances under
which the investment adviser directly or indirectly may engage in
principal transactions; (ii) the nature and significance of conflicts
with its client's interests as a result of the transactions; and (iii)
how the investment adviser addresses those conflicts; or (b) a
statement explaining that the client is consenting to principal
transactions, followed by a cross-reference to a specific document
provided to the client containing the disclosure in (a)(i)-(iii) above
and to the specific page or pages on which such disclosure is located;
provided, however, that if the investment adviser requires time to
modify its electronic systems to provide the disclosure in (a)(i)-(iii)
above immediately preceding the separate or additional signature line,
the investment adviser may, while updating such electronic systems, and
for no more than 90 days from the date of the Order, instead provide a
cross-reference to a specific document provided to the client
containing the disclosure in (a)(i)-(iii) above and to the specific
section in such document in which such disclosure is located.
Transition provision: To the extent that the adviser obtained fully
informed written revocable consent from an advisory client for purposes
of rule 206(3)-3T(a)(3) prior to the date of this Order, the adviser
may rely on this Order with respect to such client without obtaining
additional prospective consent from such client.
    5. The investment adviser, prior to the execution of each
transaction in reliance on this Order, will: (a) Inform the advisory
client, orally or in writing, of the capacity in which it may act with
respect to such transaction; and (b) obtain consent from the advisory
client, orally or in writing, to act as principal for its own account
with respect to such transaction.
    6. The investment adviser will send a written confirmation at or
before completion of each such transaction that includes, in addition
to the information required by rule 10b-10 under the Exchange Act, a
conspicuous, plain English statement informing the advisory client that
the investment adviser: (a) Disclosed to the client prior to the
execution of the transaction that the adviser may be acting in a
principal capacity in connection with the transaction and the client
authorized the transaction; and (b) sold the security to, or bought the
security from, the client for its own account.
    7. The investment adviser will send to the client, no less
frequently than annually, written disclosure containing a list of all
transactions that were executed in the client's account in reliance
upon this Order, and the date and price of each such transaction.
    8. The investment adviser is a broker-dealer registered under
section 15 of the Exchange Act and each account for which the
investment adviser relies on this Order is a brokerage account subject
to the Exchange Act, and the rules thereunder, and the rules of the
self-regulatory organization(s) of which it is a member.
    9. Each written disclosure required as a condition to this Order
will include a conspicuous, plain English statement that the client may
revoke the written consent referred to in Condition 4 above without
penalty at any time by written notice to the investment adviser in
accordance with reasonable procedures established by the investment
adviser, but in all cases such revocation must be given effect within 5
business days of the investment adviser's receipt thereof.
    10. The investment adviser will maintain records sufficient to
enable verification of compliance with the conditions of this Order.
Such records will include, without limitation: (a) Documentation
sufficient to demonstrate compliance with each disclosure and consent
requirement under this Order; (b) in particular, documentation
sufficient to demonstrate that, prior to the execution of each
transaction in reliance on this Order, the adviser informed the
advisory client of the capacity in which it may act with respect to the
transaction and that it received the advisory client's consent (if the
investment adviser informs the client orally of the capacity in which
it may act with respect to such transaction or obtains oral consent,
such records may, for example, include recordings of telephone
conversations or contemporaneous written notations); and (c)
documentation sufficient to enable assessment of compliance by the
investment adviser with sections 206(1) and (2) of the Advisers Act in
connection with its reliance on this Order.\3\ In each case, such
records will be maintained and preserved in an easily accessible place
for a period of not less than five years, the first two years in an
appropriate office of the investment adviser, and be available for
inspection by the staff of the Commission.
---------------------------------------------------------------------------

    \3\ For example, under sections 206(1) and (2), an adviser may
not engage in any transaction on a principal basis with a client
that is not consistent with the best interests of the client or that
subrogates the client's interests to the adviser's own. Cf.
Investment Advisers Act Release No. 2106 (Jan. 31, 2003) (adopting
Rule 206(4)-6).
---------------------------------------------------------------------------

    11. The investment adviser will adopt written compliance policies
and procedures reasonably designed to ensure, and the investment
adviser's chief compliance officer will monitor, the investment
adviser's compliance with the conditions of this Order. The investment
adviser's chief compliance officer will, on at least a quarterly basis,
conduct testing reasonably sufficient to verify such compliance. Such
written policies and procedures, monitoring and testing will address,
without limitation: (a) Compliance by the investment adviser with its
disclosure and consent requirements under this Order; (b) the integrity
and operation of electronic systems employed by the investment adviser
in connection with its reliance on this Order; (c) compliance by the
investment adviser with its recordkeeping obligations under this Order;
and (d) whether there is any evidence of the investment adviser
engaging in ``dumping'' in connection with its reliance on this
Order.\4\ The investment adviser's chief compliance officer will
document the frequency and results of such monitoring and testing, and
the investment adviser will maintain and preserve such documentation in
an easily accessible place for a period of not less than five years,
the first two years in an appropriate office of the investment adviser,
and be available for inspection by the staff of the Commission.
---------------------------------------------------------------------------

    \4\ See Report of the Securities and Exchange Commission,
Investment Trusts and Investment Companies, H.R. Doc. No. 279, 76th
Cong., 2d Sess., pt. 3, at 2581, 2589 (1939); Hearings on S. 3580
Before a Subcommittee of the Commission on Banking and Currency,
76th Cong., 3d Sess. 209, 212-23 (1940); Hearings on S. 3580 Before
the Subcomm. of the Comm. on Banking and Currency, 76th Cong., 3d
Sess. 322 (1940).

    By the Commission.
Brent J. Fields,
Secretary.
[FR Doc. 2016-29297 Filed 12-6-16; 8:45 am]
 BILLING CODE 8011-01-P