Home -> Law Blog Directory -> Corporate & Securities Law Blogs -> Jim Hamilton's World of Securities Regulation

Corporate & Securities Law

: Jim Hamilton's World of Securities Regulation

Blue Sky No-Action Letter: Fin. Mgmt. Advisory Co. Permits Retired Advisers to Participate in Fee-Based Program to Consult with Former Clients

By Jay Fishman

As often happens in Blue Sky law, a firm's request for a no-action letter in one state is granted so the firm makes the request in a number of states, resulting in the issue addressed in the no-action letter setting a new trend. Morever, the issue setting the trend typically arises out of a new condition in the business community taking place in the Country at the particular time.

In this situation from 2007, Merrill Lynch requested no enforcement action for permitting its financial advisers to participate, after retirement, in a fee-based program to consult with former clients without maintaining their agent and investment adviser representative registrations. Merrill Lynch probably made the no-action letter request to a number of state securities commissions, but we have published in the CCH Blue Sky Law Reporter the responses from Arizona and Kansas, that granted the firm's request.

Merrill Lynch contended its client transition program complied with NASD Rule IM 2420-2 and benefited both the participating financial advisers and their former clients by allowing the advisers, after retirement, to receive a declining fee for continuing to consult with the clients until a new adviser could be transitioned on to serve them. The Company's program, however, required the participating financial advisers to maintain their agent and investment adviser representative licenses after retirement. The no-action letter requested that registration after retirement not be required because of concern the financial advisers would switch, before retirement, to other firms that provided compensation for consulting but without the obligation of an "after retirement" registration requirement. The Company said that if the no-action letter request were granted, participating advisers would be prohibited from performing the functions of licensed agents and investment adviser representatives.

Full post as published by Jim Hamilton's World of Securities Regulation on April 24, 2008 (boomark / email).