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U.S. Securities and Exchange Commission

Final Rule:
Delegation of Authority To Cancel Registration of Certain Investment Advisers


17 CFR Part 200

[Release No. IA-1804]

Delegation of Authority to Cancel Registration of Certain Investment Advisers

AGENCY: Securities and Exchange Commission.

ACTION: Final rule.

SUMMARY: The Securities and Exchange Commission ("Commission") is amending its rules to delegate its authority to the Director of the Division of Investment Management to cancel the registration of any investment adviser that is not eligible for Commission registration. This amendment updates the staff’s delegated authority to reflect recent amendments to the Investment Advisers Act of 1940, and is intended to conserve Commission resources by permitting the staff to cancel, when appropriate, the registration of investment advisers that are not eligible to be registered with the Commission.

EFFECTIVE DATE: The rule will become effective June 28, 1999.

FOR FURTHER INFORMATION CONTACT: J. David Fielder, Senior Counsel, at (202) 942-0530, Task Force on Investment Adviser Regulation, Division of Investment Management, Securities and Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549-0506.

SUPPLEMENTARY INFORMATION: The National Securities Market Improvement Act of 1996 ("Improvement Act")1 amended the Investment Advisers Act of 1940 ("Advisers Act") to reallocate federal and state regulatory responsibility for investment advisers. Under section 203A of the Advisers Act, the Commission has regulatory responsibility for advisers with at least $25 million of assets under management and advisers to a registered investment company.2 Section 203A prohibits all other advisers from registering with the Commission. 3

Section 203(h) of the Advisers Act authorizes us to cancel the registration of certain investment advisers. 4Before enactment of the Improvement Act, we had authority to cancel the registration of advisers that were no longer in business, and we delegated this authority to the staff. 5 The Improvement Act amended Section 203(h) and gave us additional authority to cancel the registration of investment advisers that are "prohibited from registering as an investment adviser under section 203A . . . ." 6 Today, we are delegating this authority to the staff as well.

We expect the staff periodically to identify advisers whose registration should be canceled because they are not eligible for Commission registration. The staff may submit matters to the Commission for consideration as it deems appropriate. Before the staff cancels the registration of any adviser, the staff will notify the adviser and provide an opportunity to dispute the basis for the proposed cancellation, and any investment adviser whose registration is canceled by the staff may appeal that decision directly to the Commission. 7

The Commission finds, in accordance with Section 553(b)(3)(A) of the Administrative Procedure Act, that this amendment relates solely to agency organization, procedure, or practice, and does not relate to a substantive rule. 8 Accordingly, notice and opportunity for public comment are unnecessary, and publication of the amendment 30 days before its effective date is also unnecessary.

List of Subjects in 17 CFR Part 200

Administrative practice and procedure, Authority delegations (Government agencies).

Text of Amendment

For the reasons set out in the preamble, Title 17, Chapter II of the Code of Federal Regulations is amended as follows:


1. The authority citation for Part 200 continues to read in part as follows:

Authority: 15 U.S.C. 77s, 78d-1, 78d-2, 78w, 78ll(d), 78mm, 79t, 77sss, 80a-37, 80b-11, unless otherwise noted.

*  *  *

2. Section 200.30-5 is amended by revising paragraph (e)(2) to read as follows:

§ 200.30-5 Delegation of authority to Director of Division of Investment Management.

*  *  *

(2) Pursuant to section 203(h) of the Act (15 U.S.C. 80b-3(h)), to authorize the issuance of orders canceling registration of investment advisers, or applications for registration, if such investment advisers or applicants for registration are no longer in existence, not engaged in business as investment advisers, or are prohibited from registering as investment advisers under Section 203A of the Act (15 U.S.C. 80b-3a).

*  *  *

By the Commission.

  Jonathan G. Katz

Dated: June 22, 1999


-[1]- Pub. L. No. 104-290, 110 Stat. 3416 (1996) (codified in scattered sections of the United States Code).

-[2]- 15 U.S.C. 80b-3a(a)

-[3]- 15 U.S.C. 80b-3a(a). The Commission has adopted a rule that exempts certain types of advisers from this prohibition. 17 CFR 275.203A-2.

-[4]- 15 U.S.C. 80b-3(h).

-[5]- We have delegated this authority to the Division of Investment Management (17 CFR 200.30-5(e)(2)), the Office of Filings and Information Services (17 CFR 200.30-11(b)(2)(i)), and the Office of Compliance, Inspections and Examinations (17 CFR 200.30-18(h)(1)).

-[6]- 15 U.S.C. 80b-3(h)

-[7]- 17 CFR 201.430.

-[8]- 5 U.S.C. 553(b)(3)(A).