April 18 2005
Ms. Joan F. Berger
Dear Ms. Berger:
Based on the facts and representations set forth in your letter dated April 15, 2005,1 we find that it is appropriate in the public interest and consistent with the protection of investors to grant, and hereby grant, to Sanford C. Bernstein and Co., LLC ("Bernstein"), an exemption, pursuant to Rule 10b-10(f) under the Securities Exchange Act of 1934 ("Exchange Act"), from the trade-by-trade confirmation delivery requirements of Rule 10b-10(a). In lieu of trade-by-trade confirmations, Bernstein will send those Bernstein clients that have granted Bernstein's parent company, Alliance Capital Management, L.P. ("Alliance"), investment discretion over their accounts ("Discretionary Clients"), and who have requested them, periodic statements not less often than monthly that contain all of the information required by Rule 10b-10 for transactions in securities (including options) effected by Bernstein in their accounts during the applicable period.
In particular, we note the following:
This exemption from Rule 10b-10 is based solely upon the representations you have made and is limited strictly to the facts and conditions described in your letter. In the event that a material change occurs with respect to any of the facts or representations presented, periodic statements should be discontinued and the use of trade-by-trade confirmations should be reinstated for the transactions described above pending presentation of the facts for our consideration. The Division of Market Regulation expresses no view with respect to other questions Bernstein's activities may raise, including the applicability of any other federal or state laws or the applicability of self-regulatory organization rules concerning customer account statements or confirmations.
For the Commission, by the Division of Market
Brian A. Bussey
Sanford C. Bernstein & Co., LLC
Dear Ms. McGuire:
Sanford C. Bernstein & Co., LLC ("Bernstein" or the "Firm") requests an exemption, pursuant to Rule 10b-10(f) of the Securities Exchange Act of 1934 ("Exchange Act"), from the trade-by-trade confirmation delivery requirements in Rule 10b-10(a) of the Exchange Act for transactions in securities, including options, in accounts for which Bernstein's parent company, Alliance Capital Management L.P. ("Alliance"), exercises investment discretion. Bernstein requests this relief to permit it to send requesting clients, instead of trade-by-trade confirmations, a periodic statement not less often than monthly, that contains all of the information required by Rule 10b-10(a), for discretionary transactions,1 effected in their account during the applicable period.
Bernstein is a broker-dealer registered with the Securities and Exchange Commission ("Commission") pursuant to Section 15(b) of the Exchange Act, and is a member of the New York Stock Exchange, Inc. ("NYSE") and the National Association of Securities Dealers, Inc. ("NASD"). Bernstein and Alliance are investment advisers registered with the Commission pursuant to Section 203(c) of the Investment Advisers Act of 1940 ("Advisers Act"). Alliance is a leading global investment management firm that provides investment management services to a broad range of clients worldwide.
Alliance provides investment management services to private clients consisting of high net worth individuals, trusts and estates, charitable foundations, partnerships, and private and family corporations and other similar entities. Alliance provides investment management services to these private clients through its Bernstein Investment Research and Management unit ("BIRM"). Pursuant to tri-party account agreements among private clients, BIRM and Bernstein, private clients of BIRM and Bernstein ("Discretionary Clients") grant Alliance investment discretion over their Bernstein brokerage accounts,2 thereby choosing to rely on Alliance to provide ongoing oversight and to make and effect related investment decisions for their accounts.3 Bernstein would like to offer these Discretionary Clients the option to suppress trade-by-trade confirmations if they prefer to monitor their accounts only periodically through their account statements or otherwise through the information BIRM makes available to its clients.
Bernstein proposes to make available to Discretionary Clients the ability to receive, instead of trade-by-trade confirmations, a periodic statement, not less often than monthly, containing the information that would have been required to be disclosed in trade-by-trade confirmations pursuant to Rule 10b-10 absent the requested relief. In implementing this proposal:
Rule 10b-10(a) under the Exchange Act requires a broker-dealer to send trade-by-trade confirmations to its client at or before completion of each transaction. In various circumstances, the Commission and its staff have permitted broker-dealers to send the trade-by-trade confirmation either to a fiduciary with investment discretion over the account or to a third party other than the client. For example, where an account is managed by an investment adviser, a broker-dealer may send that trade-by-trade confirmation to the client's investment adviser instead of the client, provided that the broker-dealer sends the client a periodic statement, not less than quarterly, that contains all of the information required for each included transaction by Rule 10b-10.6 Moreover, in certain circumstances a broker-dealer may send a trade-by-trade confirmation to an account's third-party custodian that is authorized to receive securities and disburse funds for the account.7
The Commission staff, pursuant to delegated authority,8 has permitted broker-dealers to send to clients a periodic statement in lieu of trade-by-trade confirmations where the broker-dealer was dually registered as an investment adviser or where an investment adviser affiliated with the broker-dealer managed the account.9 Moreover, the staff has granted an exemption on behalf of certain broker-dealer sponsors of wrap fee programs, permitting such broker-dealers to confirm transactions in wrap fee programs through periodic statements in lieu of trade-by-trade confirmations.10 Outside of this wrap fee context, the staff has granted an exemption to a registered broker-dealer from the trade-by-trade requirements of Rule 10b-10 where the broker-dealer may be exercising investment discretion over a customer's account, and where the broker-dealer may be acting as principal in transactions with the customer's account.11 The relief requested here by Bernstein is similar to that previously granted by the staff.
Bernstein believes that, under the terms of the proposed exemption, Discretionary Clients will be provided the investor protections contemplated by Rule 10b-10 without obligating such clients to receive trade-by-trade confirmations where they have elected to forego day-to-day monitoring of their account through trade-by-trade confirmations. The proposal will not diminish Bernstein's clients' right to receive confirmations on request if desired, and it will give clients the option to rely on a periodic statement instead.
We welcome the opportunity to discuss this request with you. If you have any questions regarding this request, please telephone me or Robert De Leon at Bernstein. On behalf of Bernstein, we appreciate the Staff's consideration of this request.
Very truly yours,
Joan F. Berger
Brian A. Bussey, Assistant Chief Counsel
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