June 10, 2005

Steven W. Stone, Esq.
Morgan, Lewis & Bockius LLP
1111 Pennsylvania Avenue, NW
Washington, DC 20004

Re: William Blair & Company - Request for Exemption from Rule 10b-10

Dear Mr. Stone:

Based on the facts and representations set forth in your letter of June 1, 2005, we find that it is appropriate in the public interest and consistent with the protection of investors to grant, and hereby grant, William Blair & Company L.L.C. ("WB&Co.") an exemption, pursuant to Rule 10-10(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, WB&Co. will send those WB&Co. clients that have granted WB&Co. investment discretion over their accounts ("Discretionary Clients"), and who have requested them, periodic statements that contain all of the information required by Rule 10b-10 for transactions in securities, including options, effected by WB&Co. in their accounts during the applicable period.¹

In particular, we note the following:

1. WB&Co. will develop a form of written request or electronic consent for Discretionary Clients who request not to receive trade-by-trade confirmations and, in lieu thereof, receive a periodic statement that contains the same information that would have been in the trade-by-trade confirmation for each transaction. New Discretionary Clients will be able to elect to receive a periodic statement in lieu of trade-by-trade confirmations by executing a separate signature line, specifically providing for such consent, contained in their account opening documentation.
    
2. Discretionary Clients electing not to receive trade-by-trade confirmations will be able to request, for no additional cost, trade-by-trade confirmations for any transaction since the date of the last periodic statement, as well as for all subsequent transactions. WB&Co. will also inform Discretionary Clients that they may receive, for no additional cost,^2a trade-by-trade confirmations for previous transactions effected for up to a one-year period preceding the last periodic statement.
    
3. WB&Co. will send all information required by Rule 10b-10 to Discretionary Clients in a periodic statement on at least a monthly basis.
    
4. WB&Co. will inform Discretionary Clients that they may receive an interim update and further details concerning any transaction effected between periodic statements either by calling a WB&Co. representative or by checking on WB&Co.'s client website, and WB&Co. will provide such information at no additional cost. Discretionary Clients who enroll to access WB&Co.'s client website will be able to view, on the next business day after trade date ("T+ 1"), all of the information required to be disclosed under Rule 10b-10 on trades effected in their accounts. Discretionary Clients also will be able to obtain this information either by telephoning their WB&Co. account representative or by requesting the trade-by-trade confirmation for the particular transaction.
    
5. WB&Co. will continue to generate and send trade-by-trade confirmations to those Discretionary Clients who do not elect to receive periodic statements in lieu of trade-by-trade confirmations.
    
6. WB&Co. will continue to generate and retain, in accordance with Exchange Act Rules 17a-3 and 17a-4, trade-by-trade confirmations for Discretionary Clients who elect to receive periodic statements in lieu of trade-by-trade confirmations.
    
7. WB&Co. will generate and send trade-by-trade confirmations to any third-parties that serve as custodians for the accounts of any Discretionary Clients.
    
8. WB&Co. will not require or request that Discretionary Clients elect not to receive trade-by-trade confirmations, but will make information available on how such clients could choose to make such an election. WB&Co. client communications will inform existing and new Discretionary Clients about their ability to receive confirmations on a trade-by-trade basis or in periodic statements, but will not suggest which choice is better. Such client communications also will inform Discretionary Clients that, if interested, they should contact a WB&Co. representative to obtain more information or to obtain a copy of a written or electronic form to request a periodic statement in lieu of trade-by-trade confirmations. These client communications will not suggest that such an election is required for WB&Co. accounts or that the clients will incur additional costs if they do not elect to receive periodic statements in lieu of trade-by-trade confirmations.
    

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 staff expresses no view with respect to other questions WB&Co.'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.

Endnotes

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¹ WB&Co. is a broker-dealer registered with the Commission pursuant to Section 15(b) of the Exchange Act and is also an investment adviser registered with the Commission pursuant to Section 203(c) of the Investment Advisers Act of 1940 ("Advisers Act"). A number of WB&Co. clients have granted it investment discretion over their accounts not only in its capacity as a registered investment adviser but also in its capacity as a registered broker-dealer. The relief granted in this letter applies to those accounts over which WB&Co. exercises investment discretion in its capacity as a registered investment adviser and, until October 24, 2005, to accounts over which WB&Co. exercises investment discretion as a broker-dealer. October 24, 2005 is the compliance date for new Advisers Act Rule 202(a)(11)-1, which provides that broker-dealers that exercise "investment discretion" over accounts, as that term is defined in Section 3(a)(35) of the Exchange Act (other than discretion granted by a client on a temporary or limited basis), must treat those accounts as subject to the Advisers Act and the broker-dealers must be registered as investment advisers.

² Telephone conversation with Jack Drogin (June 8, 2005) (confirming that Discretionary Clients will be able to receive these confirmations at no additional cost).

³ 17 CFR 200.30-3(a)(32).

Incoming Letter:

June 1, 2005

Catherine McGuire
Chief Counsel
Division of Market Regulation
Securities and Exchange Commission
450 Fifth Street, NW
Washington, DC 20549
Mail Stop 10-1

Re: William Blair & Company - Request for Exemption From Rule 10b-10

Dear Ms. McGuire:

On behalf of William Blair & Company L.L.C. ("WB&Co."), we request 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 of Rule 10b-10(a) for transactions in securities, including options, in which WB&Co. exercises investment discretion in its capacity as a broker-dealer or as an investment adviser.¹ WB&Co. requests this relief to permit it to send requesting clients, in lieu 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 effected by WB&Co. during the applicable period.

Introduction

WB&Co. is a leading Chicago-based investment firm offering investment banking, asset management, equity research, institutional and private brokerage and private capital to individual and institutional clients and corporate issuers. WB&Co. 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 ("NYSE") and the NASD, Inc. ("NASD"). WB&Co. also is an investment adviser registered with the Commission pursuant to Section 203(c) of the Investment Advisers Act of 1940 ("Advisers Act").

WB&Co. provides advice to clients as an incident to its broker-dealer business, including under circumstances where clients grant WB&Co. investment discretion over their brokerage accounts in its capacity as a broker-dealer.² Many WB&Co. clients also have granted WB&Co. investment discretion over their accounts in its capacity as a registered investment adviser. In both situations, WB&Co.'s clients have chosen to rely on WB&Co. to provide ongoing oversight and to make and effect related investment decisions for their accounts. A number of these clients (including those granting investment discretion to WB&Co. in its capacity as broker-dealer, "Discretionary Clients") have asked WB&Co. to suppress trade-by-trade confirmations because they prefer to monitor their accounts only periodically through their account statements or otherwise through the information WB&Co. makes available to its Discretionary Clients. WB&Co. proposes to make available to Discretionary Clients the ability to receive, in lieu 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 relief requested. In implementing this proposal, WB&Co. would do the following:

• WB&Co. would develop a form of written request or electronic consent for Discretionary Clients who request not to receive trade-by-trade confirmations and, in lieu thereof, receive a periodic statement that contains the same information that would have been in the trade-by-trade confirmation for each transaction.³ Clients electing not to receive trade-by-trade confirmations could later change their minds and request, for no additional cost, trade-by-trade confirmations for any transaction since the date of the last periodic statement, as well as for all subsequent transactions. WB&Co. would inform clients that they could receive trade-by-trade confirmations for previous transactions effected for up to a one-year period preceding the last periodic statement.
   
• WB&Co. would send all information required in such trade-by-trade confirmations to Discretionary Clients in a periodic statement on at least a monthly basis.
   
• WB&Co. would inform Discretionary Clients that they could receive an interim update and further details concerning any transaction effected between periodic statements (either by calling a WB&Co. representative or by checking on WB&Co.'s client website),⁴ and WB&Co. would provide such information at no additional cost.
   
• WB&Co. would continue to generate and send trade-by-trade confirmations for those Discretionary Clients who do not elect to receive periodic statements in lieu of trade-by-trade confirmations. WB&Co. would also continue to generate and retain, in accordance with Exchange Act Rules 17a-3 and 17a-4, trade-by-trade confirmations for Discretionary Clients who elect to receive periodic statements in lieu of trade-by-trade confirmations.
   
• WB&Co. would generate and send trade-by-trade confirmations to any third-parties that serve as custodians for the accounts of any Discretionary Clients.
   
• WB&Co. would not require or request that Discretionary Clients elect not to receive trade-by-trade confirmations, but would make information available on how such clients could make such an election. WB&Co. client communications would inform existing and new Discretionary Clients about their ability to receive confirmations on a trade-by-trade basis or in periodic statements, but would not suggest which choice is best. Such client communications also would inform Discretionary Clients that, if interested, they should contact a WB&Co. representative to obtain more information or to obtain a copy of a written or electronic form to request a periodic statement in lieu of trade-by-trade confirmations. These client communications would not suggest that such an election is required for WB&Co. discretionary accounts or that clients would incur additional costs if they did not elect to receive periodic statements in lieu of trade-by-trade confirmations.
   

Prior Commission Action

Rule 10b-10(a) under the Exchange Act requires a broker-dealer to send a trade-by-trade confirmation to its client at or before completion of each transaction. In various instances, 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 the 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-10.⁵ 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.⁶

The Commission staff, pursuant to delegated authority,⁷ has previously provided the exemptive relief requested by WB&Co. to another broker-dealer.⁸ The Commission staff, pursuant to delegated authority, has also permitted certain 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 and was exercising investment discretion in such capacity, or where investment discretion was being exercised by a broker-dealer's investment adviser affiliate.⁹ The Commission staff, pursuant to delegated authority, has also 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

The relief requested by WB&Co. is consistent with a line of letters permitting broker-dealers to send periodic statements in lieu of trade-by-trade confirmations where the broker-dealer or its affiliate exercises investment discretion over the account. As discussed generally in those prior letters, WB&Co.'s actions will be governed by the fiduciary requirements of the Advisers Act when WB&Co. is acting in its advisory capacity. Similarly, when WB&Co. exercises investment discretion in its broker-dealer capacity, WB&Co.'s actions will be governed by the Exchange Act and NYSE and NASD rules that impose heightened supervisory requirements over transactions effected on behalf of discretionary brokerage accounts.¹¹ Moreover, these transactions will be governed by the suitability and best execution standards for broker-dealers, which parallel those for registered investment advisers.¹² Indeed, when formulating proposed Rule 206(4)-5 under the Advisers Act, which would have created an express suitability obligation for investment advisers, the Commission looked primarily to interpretations of the scope of broker-dealer suitability obligations under the Exchange Act.¹³

* * * * *

WB&Co. 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 such confirmations. The proposal will not diminish WB&Co.'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 call me or Jack Drogin at 202.739.5380. On behalf of WB&Co., we appreciate the staff's consideration of this request.

Yours truly,
Steven W. Stone

Endnotes

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¹ WB&Co. is requesting relief for transactions in which WB&Co. exercises investment discretion as that term is defined in Section 3(a)(35) of the Exchange Act. Where WB&Co. does not exercise investment discretion, WB&Co. will send a trade-by-trade confirmation consistent with Rule 10b-10. WB&Co. will continue to generate and send trade-by-trade confirmations of any transactions WB&Co. effects pursuant to a hold-in-custody repurchase agreement, as required by Exchange Act Rule 15c3-3(b)(4).

² The SEC recently determined that the exercise of investment discretion by a broker-dealer (other than discretion granted by a client on only a temporary or limited basis) is not "solely incidental to" brokerage within the meaning of Advisers Act Section 202(a)(11)(C). Under new Advisers Act Rule 202(a)(11)-1, broker-dealers that exercise "investment discretion" over accounts, as that term is defined in Section 3(a)(35) of the Exchange Act (other than discretion granted by a client on only a temporary or limited basis), must therefore treat those accounts as subject to the Advisers Act and the broker-dealers must be registered as investment advisers. The compliance date for Rule 202(a)(11)-1 is October 24, 2005. See Advisers Act Release No. 2376 (April 12, 2005). WB&Co. is seeking relief with respect to accounts over which WB&Co. exercises investment discretion as a broker-dealer until that date.

³ New Discretionary Clients may be able to elect to receive a periodic statement in lieu of trade-by-trade confirmations by executing a separate signature line, specifically providing for such consent, contained in the client's account opening documentation.

⁴ Discretionary Clients who enroll to access WB&Co.'s client website will be able to view, on the next business day after trade date ("T+1"), all of the information required to be disclosed under Rule 10b-10 on trades effected in their accounts. Discretionary Clients also will be able to obtain all required transaction information either by telephoning their WB&Co. account representative or by requesting the trade-by-trade confirmation for the particular transaction.

⁵ See Securities Exchange Act Release No. 34962 (November 10, 1994).

⁶ Id.

⁷ See 17 C.F.R. § 200l.30-3(a)(32).

⁸ See Goldman, Sachs & Co. (August 14, 2003).

⁹ See Donaldson, Lufkin & Jenrette Securities Corporation (August 21, 1997); Scudder Investment Services, Inc. (February 11, 1998); Advest, Inc. (July 19, 1999); Sanford C. Bernstein & Co., LLC (April 18, 2005); and Morgan Keegan & Co., Inc. (April 21, 2005).

¹⁰See Money Management Institute, Securities Industry Association (August 23, 1999).

¹¹See e.g., NYSE Rule 408 and NASD Rule 2510 (requiring heightened supervision of discretionary brokerage accounts); NYSE Rules 722 and 724 and NASD Rule 2860(b)(requiring supervision of discretionary options accounts); and NYSE Rule 414(i) and NASD Rule 2845 (stating that the rules governing supervision of discretionary accounts in options govern discretionary accounts in currency warrants, currency index warrants, and stock index warrants). To help fulfill WB&Co.'s obligations to supervise its discretionary brokerage accounts, WB&Co. compliance personnel review trading in accounts of Discretionary Clients generally each trading day, by reviewing reports about the previous trading day's discretionary trades, collectively containing all of the information required to be reported on confirmations under Rule 10b-10.

¹²The regulatory schemes for broker-dealers and investment advisers are not parallel in all respects. For example, Section 206(3) of the Advisers Act imposes additional requirements on investment advisers effecting agency cross and principal transactions in client accounts.

¹³See Investment Advisers Act Release No. 1406 (March 16, 1994).

http://www.sec.gov/divisions/marketreg/mr-noaction/mlb061005.htm