Client Alert

SEC Provides Limited Principal Trading Relief and Proposes Interpretive Rule for Broker-Dealer Exclusion

October 23, 2007

The Investment Management Practice Group

On September 24, 2007, the Securities and Exchange Commission adopted Temporary Rule 206(3)-3T under the Investment Advisers Act of 1940 to afford investment advisers that are dually registered as broker-dealers limited relief from the principal trading restrictions under Section 206(3) of the Advisers Act. In a companion release, the SEC proposed Rule 202(a)(11)-1 under the Advisers Act to address the application of the Advisers Act to broker-dealers. The Proposed Rule would re-codify nearly identical interpretative positions that were included in the original version of Rule 202(a)(11)-1 that was adopted by the SEC in 2005 and subsequently vacated by the court of appeals for the D.C. Circuit on March 30, 2007.

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