August 15, 2006
John V. Ayanian, Esq.
Morgan Lewis & Bockius LLP
1111 Pennsylvania Avenue, NW
Washington, DC 20004
Re: Request for Exemption from Rule 10b-10(a) for Wachovia Securities
Dear Mr. Ayanian:
Based on the facts and representations set forth in your letter of August 11, 2006, we find that it is appropriate in the public interest and consistent with the protection of investors to grant, and hereby grant, an exemption, pursuant to Rule 10b-10(f) under the Securities Exchange Act of 1934 ("Exchange Act"), from the trade-by-trade confirmation delivery requirements of Rule 10b-10(a) so that Wachovia Securities, LLC ("WSLLC"), and its affiliate, Wachovia Securities Financial Network, LLC ("WSFN"), both registered broker-dealers, may send clients (collectively, "Program Clients"), participating in three specific investment advisory programs, the Private Investment Management, Fundamental Choice, and Quantitative Choice Programs (collectively, the "Programs"), who have requested them, periodic statements not less often than quarterly, in lieu of trade-by-trade confirmations. The periodic statements will contain all of the information required by Rule 10b-10 for transactions in securities effected by WSLLC and WSFN for Program Clients in their accounts during the applicable period.
In particular, we note the following:
1. WSLLC and WSFN will provide all Program Clients, at or prior to account opening, and at least annually thereafter offer to provide, a brochure describing the products, services, and fees of the Programs.
2. WSLLC and WSFN will develop a form of written or electronic consent that will be prominent, clear and easily understandable for Program Clients who request not to receive trade-by-trade confirmations and, in lieu thereof, receive a periodic statement that contains the same information that would have been in the trade-by-trade confirmation for each transaction. New Program Clients will elect to receive a periodic statement in lieu of trade-by-trade confirmations by initialing a separate signature line specifically providing for such consent (or by executing a separate electronic consent to receive periodic statements in lieu of trade-by-trade confirmations), contained in the client's account opening documentation.
3. Program Clients electing to receive periodic statements in lieu of trade-by-trade confirmations will be able to later change their minds and request, for no additional cost, trade-by-trade confirmations for any transaction since the date of the last periodic statement, as well as for all subsequent transactions. WSLLC and WSFN will also inform their respective Program Clients that they may request, for no additional fee, trade-by-trade confirmations for previous transactions effected for up to a one-year period preceding the last periodic statement.
4. WSLLC and WSFN will send all information required by Rule 10b-10 to Program Clients in a periodic statement on at least a quarterly basis.
5. Program Clients will have access to either WSLLC's or WSFN's website, as applicable, and will be able to view, in no event later than the next business day after trade date (T+1), all information required by Rule 10b-10. Program Clients will also be able to obtain all information required by Rule 10b-10 either by telephoning their respective account representatives or by requesting the trade-by-trade confirmation for the particular transaction.
6. WSLLC and WSFN will each continue to generate and send trade-by-trade confirmations to those Program Clients who do not elect to receive periodic statements in lieu of trade-by-trade confirmations.
7. WSLLC and WSFN will each continue to generate and retain, in accordance with Exchange Act Rules 17a-3 and 17a-4, trade-by-trade confirmations for Program Clients who elect to receive periodic statements in lieu of trade-by-trade confirmations.
8. Neither WSLLC nor WSFN will require or request that their respective Program Clients elect not to receive trade-by-trade confirmations, but each will make information available on how such clients will be able to make such an election. WSLLC and WSFN client communications will inform existing and new Program Clients about their ability to receive confirmations on a trade-by-trade basis or in periodic statements, but will not suggest which choice is better. Such client communications also will inform Program Clients that, if interested, they should contact a WSLLC or WSFN representative, as applicable, to obtain more information or to obtain a copy of a written or electronic consent to request a periodic statement in lieu of trade-by-trade confirmations. These client communications will not suggest that such an election is required for Program accounts or that the clients will incur additional costs if they do not elect to receive periodic statements in lieu of trade-by-trade confirmations.
9. Neither WSLLC nor WSFN will act as principal in transactions with their respective Program Clients.
10. Consistent with the wrap fee program concept of no transaction fees, no Program Clients will be charged a mark-up, mark-down or commission for transactional services, or pay a sales load in connection with transactions in mutual fund shares.1
This exemption from Rule 10b-10 is based solely upon the representations you have made and is limited strictly to the facts and conditions described in your letter. In the event that a material change occurs with respect to any of the facts or representations presented, periodic statements should be discontinued and the use of trade-by-trade confirmations should be reinstated for the transactions described above pending presentation of the facts for our consideration. The staff of the Division of Market Regulation expresses no view with respect to other questions that the Programs may raise, including the applicability of any other federal or state laws or the applicability of self-regulatory organization rules concerning customer account statements or confirmations.
For the Commission, by the
Division of Market Regulation
Pursuant to delegated authority,2
Brian A. Bussey
Assistant Chief Counsel
Endnotes
Incoming Letter:
The Incoming Letter is in Acrobat format.
http://www.sec.gov/divisions/marketreg/mr-noaction/wachovia081506.htm
