SEC Extends No-Action Position for Broker-Dealer AML Reliance on Advisers

The SEC extended its no-action position for broker-dealers that rely on registered investment advisers to fulfill their obligations under the customer identification program ("CIP Rule") and the portion of the customer due diligence rule regarding beneficial ownership requirements for legal entity customers. The position, which was originally issued in 2004 and set to expire on December 9, 2022, has been extended until December 9, 2024.

Consistent with this position, the SEC's Division of Trading and Markets will not recommend enforcement action if a broker-dealer "treats an investment adviser as if it were subject to an AML Program Rule for the purposes of paragraph (a)(6) ("Reliance on another financial institution") of the CIP Rule and/or paragraph (j) ("Reliance on another financial institution") of the Beneficial Ownership Requirements." But the relief is contingent upon (i) meeting other provisions of the rules and requirements, (ii) demonstrating the broker-dealer's reasonable need for the relief, (iii) maintaining the investment adviser's SEC registration and (iv) maintaining the adviser's own AML program and assuming responsibility of AML compliance for the broker-dealer.