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SEC Commissioner Questions Informal Staff Guidance

SEC Commissioner Hester Peirce recently criticized unpublished staff guidance that operates as de facto legal precedent without going through a process that ensures transparency and accountability.  Referring to the securities regulatory framework as a “compliance minefield” where the wrong move can be a “matter of professional life or death,” Ms. Peirce questioned the propriety of informal staff positions about specific products or types of businesses.  She characterized sub rosa staff guidance as secret law that binds firms without legislative authority, effective oversight, or consistency. 

We agree that unpublished staff guidance can result in industry favoritism and (perceived) unfairness.  The next question is how the SEC addresses Ms. Peirce’s very legitimate concerns. 

SEC Staff Provides Guidance for Adviser M&A and Reorg Transactions


The staff of the SEC’s Investment Management Division has provided guidance clarifying that, absent a change in control, an internal reorganization of an investment adviser does not require a new registration.  The staff opines that an unregistered entity that acquires the assets of an affiliate RIA need only file a succession by amendment, so long as the same parent company continues to control both entities.  The staff offered similar guidance with respect changes in jurisdiction and form of organization.  However, a change in control would require the filing of a succession by application.   In either event, the registrant must file within 30 days of the subject event.

OUR TAKE: With expected consolidation coming in the asset management sector, the staff offers practical regulatory guidance that will facilitate transactions.