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SEC No Action Letter on Performance Data

Record retention and RIA Performance Data Clarified

By John M. Baker, Esq.

The SEC’s Division of Investment Management recently issued a no-action letter on recordkeeping requirements for registered investment advisers’ performance data.

Jennison Associates LLC, SEC No-Action Letter (July 6, 2000). Investment Advisers Act Rule 204-2(a)(16) generally requires registered investment advisers to keep all records or documents that are necessary to form the basis for or demonstrate the calculation of the performance or rate of return in any advertisement or other communication distributed to 10 or more persons.

Jennison Associates, a registered investment adviser that had lost some of its records in a fire, sought no-action relief allowing it to continue to advertise its earlier performance record on the basis of existing records. The SEC staff declined to give no-action assurance on specific facts, but took the opportunity to give some general guidance on the record-keeping requirement.

The staff stated that advisers who advertise their performance can facilitate examinations by the staff by maintaining the following records: (i) records prepared by a third party (e.g., custodial or brokerage statements) that confirm the accuracy of client account statements and other performance-related records maintained by the adviser; and (ii) reports prepared by an independent auditor that verify the advisers’ advertised performance.

The staff also stated a number of factors it would take into account when reviewing auditor reports as part of an assessment of whether an adviser maintains sufficient records.

I have placed a copy of the Jennison Associated no-action letter on the eGroups web site, and it may be accessed in Word format from http://www.egroups.com/files/fundlaw/

Copyright 2000, John M. Baker, Esq., Stradley, Ronon, Stevens & Young, LLP, 1220 19th Street, N.W., Suite 700, Washington, DC 20036 – (202) 822-9611- Fax (202) 822-0140 This article was originally posted to the FundLaw List, http://www.egroups.com/group/fundlaw. To subscribe to FundLaw, send a blank e-mail to fundlaw-subscribe@egroups.com

Nothing herein is intended as legal or financial advice. The law is different in different jurisdictions, and the facts of a particular matter can change the application of the law. Please consult an attorney or your financial advisor before acting upon the information contained in this article.  

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