April 13, 2007
Lee A. Pickard, Esq.
Dear Mr. Pickard:
In your letter dated April 11, 2007, on behalf of Capital Institutional Services, Inc. ("CAPIS"), you request assurances that the staff of the Division of Market Regulation ("Staff") will not recommend enforcement action to the Commission under Section 15(a) of the Securities Exchange Act of 1934 ("Exchange Act") against research vendors participating in CAPIS' client commission arrangements ("Research Vendors") if those Research Vendors receive compensation for products and services that are considered "research services" under the safe harbor set forth in Section 28(e) of the Exchange Act, as recently interpreted by the Commission ("Research Services"),1 without registering as broker-dealers pursuant to Section 15(b) of the Exchange Act.
Based on the facts and representations set forth in your letter, the Staff will not recommend enforcement action to the Commission under Section 15(a) of the Exchange Act if a Research Vendor receives payment for its Research Services from credits generated from client commissions set apart in a client commission arrangement under Section 28(e) of the Exchange Act without registering as a broker-dealer.2 In reaching this position, we note in particular the following:
This position is based on the facts presented and the representations you have made, and any different facts and circumstances may require a different response. Furthermore, this response expresses the Staff's position on enforcement action only and does not purport to express any legal conclusions on the question presented. The Staff expresses no view with respect to any other questions that the proposed activities may raise, including the applicability of any other federal or state laws or self-regulatory organization rules.
Brian A. Bussey
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