U.S. Securities & Exchange Commission
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U.S. Securities and Exchange Commission

May 8, 2006

David J. Harris, Esq.
Dechert Price & Rhoads
1775 Eye Street, N.W.
Washington, DC 20006-2401


Revocation of No-Action Relief Granted to M Financial Holdings, Inc. and Certain Insurance Agencies

Dear Mr. Harris:

By letters dated October 2, 1987 ("1987 letter"), and June 14, 1988 ("1988 letter"), the staff of the Division of Market Regulation gave assurances to M Financial Holdings, Inc. ("M Financial") and its affiliated insurance agencies ("affiliated agencies") that it would not recommend enforcement action to the Commission under Section 15(a) of the Securities Exchange Act of 1934 ("Exchange Act") if, without registering as broker-dealers under Section 15(b) of the Exchange Act, the affiliated agencies received commissions from the sale of variable life insurance products ("insurance securities") and M Financial provided marketing and administrative services to the affiliated agencies and unaffiliated registered broker-dealers in connection with the sale of insurance securities.

As described in the 1987 and 1988 letters, M Financial provides marketing and other administrative services to affiliated agencies licensed to transact insurance business in one or more states. M Financial and its affiliated agencies proposed to enter into contractual relationships with third-party registered broker-dealers, whereby persons employed by an affiliated agency who participated in the sale of insurance securities would do so in a dual capacity as both registered representatives of the broker-dealer and as employees of the affiliated agency. M Financial represented that its participation in the sale of insurance securities would be limited to publicizing jointly with the broker-dealers the availability of such products, referring potential purchasers of the securities to registered representatives of the broker-dealers, and providing clerical and ministerial services. Based upon these representations, among others, the 1987 letter permitted insurance carriers to pay commissions from the sales of insurance securities directly to the affiliated agencies. The 1988 letter permitted M Financial to receive compensation based in part on the aggregate premium revenues produced by these insurance securities transactions.

We understand that since the issuance of the 1987 and 1988 letters, M Financial and its affiliated agencies have changed their business plan such that their operations are no longer entirely consistent with the representations in the 1987 and 1988 letters. As you know, the relief granted in those letters is based on the facts and representations presented therein, and any different facts or conditions might require a different response. We, therefore, are withdrawing the 1987 and 1988 letters to M Financial and its affiliated agencies.

Our letter to First of America Brokerage Service, Inc., dated September 28, 1995, reflects our current views on networking arrangements among registered broker-dealers, insurance companies, and insurance agencies in connection with the offer and sale of insurance securities. The letter sets out the conditions under which we generally will not recommend enforcement action to the Commission in connection with unregistered insurance agencies participating in insurance networking with registered broker-dealers. First of America permits, among other things, the payment of commissions (or other transaction-related compensation) from insurance securities to an unregistered insurance agency, but only if state law requires that such commissions be paid to an insurance agency licensed to sell insurance in that state, and regulatory impediments exist that prevent a particular entity from both registering as a broker-dealer and acquiring an insurance agency license.1 First of America further requires, among other things, that commissions paid to dual representatives for securities transactions be determined solely by the broker-dealer, and that such payments be paid as directed by, and on behalf of, the broker-dealer.


Catherine McGuire
Chief Counsel




Modified: 05/12/2006