Investment Company Act of 1940 — Sections 3(c)11 and 7
RESPONSE OF THE OFFICE OF CHIEF COUNSEL
IM Ref. No. 200898110
Your letter dated June 4, 2010 requests our assurance that we would not recommend enforcement action to the Securities and Exchange Commission ("Commission") against ABA Retirement Funds ("ABA RF"), an Illinois not-for-profit corporation, the ABA Retirement Funds Program (the "Program"), the American Bar Association Members Retirement Trust ("Master Trust"), the American Bar Association Members Pooled Trust for Retirement Plans (the "Pooled Trust," and together with the Master Trust, the "Conduit Trusts"), or the American Bar Association Members/ Northern Trust Collective Trust (the "Collective Trust") under section 7 of the Investment Company Act of 1940 ("1940 Act") or section 5 of the Securities Act of 1933 ("1933 Act") if the Conduit Trusts do not register under the 1940 Act or register the offer and sale of the interests therein under the 1933 Act.
Your request is the latest in a series of staff no-action letters relating to the Program ("Prior Letters").1 You state that, in reliance on the Prior Letters, the Conduit Trusts and the interests therein have not been registered under section 7 of the 1940 Act or section 5 of the 1933 Act, respectively. You state that the 1991 Letter, the most recent of the Prior Letters, set forth certain representations about the Program. You state that changes contemplated for the Program affect those representations, and you seek confirmation of the staff's no-action positions if these changes are implemented.
The Program offers lawyers and law firms that are members of the American Bar Association ("ABA") or members of state and local bar associations represented in the ABA's House of Delegates a method to adopt and maintain tax-qualified retirement plans for their benefit and the benefit of their employees. Since the inception of the Program, the ABA RF has selected and monitored the Program's vendors and their performance on behalf of the adopting employers.
You state that participants in the Program ("Participants") participate through either their own individually designed retirement plans ("Individually Designed Plans") or by adopting a plan established in accordance with one or both of two master plans sponsored by the ABA RF (the "ABA Members Plans" and, together with the Individually Designed Plans, the "Plans"). You state that all of the Plans participating in the Program meet the requirements for qualification under section 401(a) of the Internal Revenue Code of 1986 (the "Code").2 You state that the assets of ABA Members Plans invested under the Program are held in trust in accordance with the provisions of the "master trust," which is adopted by each Participant that adopts an ABA Members Plan. You state that the assets of Individually Designed Plans invested under the Program are held in trust in accordance with the provisions of the "pooled trust," which is adopted by each Participant that sponsors an Individually Designed Plan that participates in the Program. You state that, at the time the assets are contributed under the Plans and received by or on behalf of the trustee of the Conduit Trusts, the assets are immediately passed through to the Investment Options, as defined below, that are made available under the Program's bank-maintained Collective Trust. You state that the trustee of the Conduit Trusts, currently State Street Bank and Trust Company ("State Street"), exercises no discretion with respect to the investment of assets contributed thereto. You state that the Conduit Trusts provide an administrative convenience to the maintenance of the Program and have no economic substance separate and apart from the Investment Options made available under the Collective Trust.
You state that the Collective Trust consists of a series of bank-maintained collective trust sub-funds ("Funds"), which are referred to as the Program's "Investment Options."3 State Street currently retains exclusive management and control over the Funds and the engagement and retention of investment advisers to assist in the management of the Funds. You state that ABA RF currently has the right to make recommendations to State Street regarding the addition or deletion of Funds as Investment Options and the engagement or termination of investment advisers.
You state that certain changes are contemplated for the Program ("Proposed Changes") that will not affect the structure or function of the Conduit Trusts, but will affect certain representations about the Program made in connection with the 1991 Letter. You state that the Proposed Changes are as follows:
State Street will be replaced as the trustee of the Conduit Trusts and the Collective Trust and the provider of investment services to the Program.4 Northern Trust Company ("Northern") will become the trustee of the Conduit Trusts and its wholly owned subsidiary, Northern Trust Investments, N.A. ("NTI"), will become the trustee and provider of investment services to the Collective Trust.5
NTI, as trustee of the Collective Trust, will be permitted to invest the assets of one or more of the Funds in collective trust funds maintained by other banks, including State Street ("Other Bank Collective Trust Funds"), or shares of open-end investment companies registered under the 1940 Act ("RICs").6
ABA RF no longer will have any contractual rights to make recommendations to NTI regarding the selection or retention of investment advisers.
You represent that the Proposed Changes will have no material effect on the structure or function of the Conduit Trusts from that underlying the 1991 Letter. You also represent as counsel that the Collective Trust, if maintained by NTI in accordance with the Proposed Changes, will continue to satisfy the requirements for the exclusion from the definition of investment company under section 3(c)(11) of the 1940 Act as a bank-maintained collective trust fund.7 You state that the fact that ABA RF no longer will have contractual rights to make recommendations to NTI regarding the selection or retention of investment advisers reinforces NTI's investment responsibility over the Collective Trust.
You also state that, under prior staff no-action positions, proposed investment by the Funds in Other Bank Collective Trust Funds will not affect the Funds' or the Other Bank Collective Trust Funds' ability to rely on section 3(c)(11) of the 1940 Act. You further state that proposed investment by the Funds in RICs is consistent with prior staff positions concerning the availability of the exclusion in section 3(c)(11) to bank-maintained collective trust funds that do so invest. You represent that there will be no duplication of advisory fees with respect to any Investment Options that may invest in Other Bank Collective Trust Funds or RICs.
Based on the facts and representations set forth in your letter, and without necessarily agreeing with your legal analysis, the staff of the Division of Investment Management would not recommend enforcement action to the Commission against ABA RF, the Program, the Conduit Trusts, or the Collective Trust under section 7 of the 1940 Act if the Conduit Trusts do not register under the 1940 Act.
The Division of Corporation Finance has asked us to advise you that it would not recommend enforcement action to the Commission, if in reliance upon your opinion as counsel that registration is not required, the Program is administered as described in your letter without registration under the Securities Act of 1933.
These positions are based solely on the facts and representations set forth in your letter, and any different facts or representations might require a different position. The response expresses the staff's position on enforcement action only and does not represent any legal conclusions regarding the matters discussed in your letter.
Stephen Van Meter
|Home | Previous Page||