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U.S. Securities and Exchange Commission

Investment Advisers Act of 1940 - Section 206(4) and Rule 206(4)-3
Stifel, Nicolaus & Company, Inc., December 6, 2016

RESPONSE OF THE CHIEF COUNSEL’S OFFICE
DIVISION OF INVESTMENT MANAGEMENT

Stifel, Nicolaus & Company, Inc.


We would not recommend enforcement action to the United States Securities and Exchange Commission ("Commission") under Section 206(4) of the Investment Advisers Act of 1940 ("Advisers Act") and Rule 206(4)-3 thereunder if any investment adviser that is required to be registered pursuant to Section 203 of the Advisers Act pays to Stifel, Nicolaus & Company, Inc. ("Stifel Nicolaus"), or any of Stifel Nicolaus’ associated persons, as defined in Section 202(a)(17) of the Advisers Act, a cash payment, directly or indirectly, for the solicitation of advisory clients in accordance with Rule 206(4)-3,[1] notwithstanding a final judgment, which has been entered by the United States District Court for the Eastern District of Wisconsin (the "Final Judgment"), that otherwise would preclude such an investment adviser from paying such a fee, directly or indirectly, to Stifel Nicolaus.[2]

Our position is based on the facts and representations in your letter dated December 6, 2016, particularly the representations of Stifel Nicolaus that:

  1. It or any person associated with it will conduct any cash solicitation arrangement entered into with any investment adviser registered or required to be registered under Section 203 of the Advisers Act in compliance with the terms of Rule 206(4)-3 as if Stifel Nicolaus were not a disqualified person for purposes of Rule 206(4)-3 by virtue of the Final Judgment;
  2. The Final Judgment does not bar or suspend any person currently associated with Stifel Nicolaus from acting in any capacity under the federal securities laws; [3]
  3. It will comply with the terms of the Final Judgment, including, but not limited to, the Injunction and the payment of disgorgement and a civil monetary penalty; and
  4. Until ten (10) years from the date of the entry of the Final Judgment on December 6, 2016, Stifel Nicolaus and any person associated with it or any investment adviser with which it or any person associated with it has a solicitation arrangement subject to Rule 206(4)-3 will disclose the Final Judgment in a written document that is delivered to each person whom Stifel Nicolaus or its associated persons solicit (a) not less than 48 hours before the person enters into a written or oral investment advisory contract with the investment adviser, or (b) at the time the person enters into such a contract, if the person has the right to terminate such contract without penalty within five business days after entering into the contract.

This position applies only to the Final Judgment and not to any other basis for disqualification under Rule 206(4)-3 that may exist or arise with respect to Stifel Nicolaus.

Vanessa M. Meeks
Senior Counsel


[1] Rule 206(4)-3 prohibits any investment adviser that is required to be registered under the Advisers Act from paying a cash fee, directly or indirectly, to any solicitor with respect to solicitation activities if, among other things, the solicitor is subject to an order, judgment or decree that is described in Section 203(e)(4) of the Advisers Act.

[2] Securities and Exchange Commission v. Stifel, Nicolaus & Company, Inc., et al., Case No. 2:11-cv-00755 (E.D. Wisconsin, December 6, 2016).

[3] Under Section 9(a) of the Investment Company Act, Stifel Nicolaus and its affiliated persons as defined in section 2(a)(3) of the Investment Company Act (“Affiliated Persons”) will, as a result of the Injunction included in Final Judgment, be prohibited from serving or acting as, among other things, an investment adviser or depositor of any registered investment company or principal underwriter for any registered open-end investment company or registered unit investment trust (“Fund Servicing Activities”). Stifel Nicolaus, together with Choice Financial Partners, Inc. (doing business as EquityCompass Strategies) (“Choice”), 1919 Investment Counsel, LLC (“1919ic”), and Ziegler Capital Management, LLC (“ZCM” and collectively with Choice and 1919ic, the “Fund Servicing Applicants”) filed an application under Section 9(c) of the Investment Company Act (the “Application”) requesting that the Commission issue both temporary and permanent orders exempting the Fund Servicing Applicants, any existing company of which Stifel Nicolaus is an Affiliated Person, and any other company of which Stifel Nicolaus may become an Affiliated Person in the future (together, the “Covered Persons”), from the restrictions of Section 9(a).  On the basis of the representations and conditions contained in the Application, the Commission issued a notice and temporary order exempting the Covered Persons from the prohibitions of Section 9(a) of the Investment Company Act resulting from the Injunction included in the Final Judgment.  Stifel Nicolaus was a party to the Application, but does not currently engage in any Fund Servicing Activities and accordingly did not request relief under Section 9(a) of the Investment Company Act. Stifel Nicolaus will not engage in any Fund Servicing Activities absent seeking relief from the Commission. 


Incoming Letter

The Incoming Letter is in Acrobat format.


http://www.sec.gov/divisions/investment/noaction/2016/stifel-nicolaus-120616-206(4).htm


Modified: 12/08/2015