[Federal Register Volume 62, Number 240 (Monday, December 15, 1997)]
[Notices]
[Pages 65725-65727]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-32653]
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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IA-1684/803-124]
Thomson Technical Data Corporation; Notice of Application
December 9, 1997.
AGENCY: Securities and Exchange Commission (``SEC'').
ACTION: Notice of Application for Exemption under the Investment
Advisers Act of 1940. (``Advisers Act'').
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APPLICANT: Thomson Technical Data Corporation (``Technical Data'').
RELEVANT ADVISERS ACT SECTIONS: Exemption requested under section
203A(c) from section 203A(a).
SUMMARY OF APPLICATION: Applicant requests an order to permit it to
register with the SEC as an investment adviser.
Filing Dates: The application was filed on September 25, 1997 and
amended on October 8, 1997.
Hearing or Notification of Hearing: An order granting the
application will be issued unless the SEC orders a hearing. Interested
persons may request a hearing by writing to the SEC's
[[Page 65726]]
Secretary and serving applicant with a copy of the request, personally
or by mail. Hearing requests should be received by the SEC by 5:30 p.m.
on January 5, 1998, and should be accompanied by proof of service on
applicant, in the form of an affidavit or, for lawyers, a certificate
of service. Hearing requests should state the nature of the writer's
interest, the reason for the request, and the issues contested. Persons
may request notification of a hearing by writing to the SEC's
Secretary.
ADDRESSES: Secretary, SEC, 450 5th Street, N.W., Washington, D.C.
20549. Applicant, Thomson Technical Data Corporation, 22 Pittsburgh
Street, Boston, Massachusetts 02210.
FOR FURTHER INFORMATION CONTACT:
Robert J. Leonard, Attorney, at (202) 942-0646, or Jennifer S. Choi,
Special Counsel, at (202) 942-0716 (Division of Investment Management,
Task Force on Investment Adviser Regulation).
SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained for a fee at the
SEC's Public Reference Branch.
Applicant's Representations
1. Applicant is a Delaware corporation and an indirect, wholly-
owned subsidiary of Thomson Corporation. Applicant publishes various
market analyses through the Dow Jones Markets communication network and
affords clients the opportunity to contact its analysts by telephone to
discuss the published information.
2. Applicant's publications include: comprehensive technical,
fundamental and statistical analysis of the world's major government
bond and international money and deposit markets; real-time commentary,
trading recommendations and yield curve analysis to global participants
in the U.S. Treasury market; comprehensive coverage of the mortgage-
backed and asset-backed securities markets; and technical and
fundamental analysis and trading recommendations for Canadian
government bonds, money markets and the Canadian Dollar.
3. Applicant also provides real-time analysis and commentary on
financial, political and social events that affect the capital markets
of Latin America, Eastern and Central Europe Asia and Japan.\1\
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\1\ Applicant states that, because certain of its publications
relate to the futures markets, applicant is registered with the
Commodity Futures Trading Commission as a commodity trading adviser.
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4. Applicant's services are provided to clients on a subscription
basis, with rates dependent on the nature and quantity of specific
services subscribed to by the client. Applicant has approximately
15,000 subscribers, located in over sixty countries. Almost all of
applicant's subscribers are connected with major financial institutions
or regulatory bodies, such as Federal Reserve Banks. The largest
portion of applicant's client base in the institutional trading desks
and sales staff of national and international broker-dealers. The
second largest segment of applicant's client base consists of
commercial banks. Applicant's other clients include money managers,
other brokerage houses and regulators. Less than one-tenth of one
percent of applicant's clients are individual investors.
5. Applicant maintains its principal office and place of business
in Massachusetts. Applicant is registered as an investment adviser in
Massachusetts and New York. Applicant was registered as an investment
adviser with the SEC until July 8, 1997.
Applicant's Legal Analysis
1. On October 11, 1996, the National Securities Markets Improvement
Act of 1996 was enacted. Title III of the Act, the Investment Advisers
Supervision Coordination Act (``Coordination Act''), added new section
203A to the Advisers Act. Under section 203A(a)(1),\2\ an investment
adviser that is regulated or required to be regulated as an investment
adviser in the state in which it maintains its principal office and
place of business is prohibited from registering with the SEC unless
the investment adviser (i) has assets under management of not less than
$25 million or (ii) is an adviser to an investment company registered
under the Investment Company Act of 1940 (``Investment Company Act'')
Section 203A(a)(2) defines the phrase ``assets under management'' as
the ``securities portfolios with respect to which an investment adviser
provides continuous and regular supervisory or management services.''
\3\
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\2\ 15 U.S.C. 80b-3a(a)(1).
\3\ 15 U.S.C. 80b-3a(a)(2).
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2. Applicant states that the Coordination Act was designed to
optimize the distribution of regulatory resources and ease the burden
of duplicative or inconsistent regulation by dividing advisers into two
broad categories: those whose activities are deemed to be national in
scope, who are to be regulated primarily by the SEC, and those whose
activities are of a more local nature, who are to be regulated
primarily by the states.
3. Section 203A(c) of the Advisers Act authorizes the SEC to permit
an investment adviser to register with the SEC if prohibiting
registration would be ``unfair, a burden on interstate commerce, or
otherwise inconsistent with the purposes of [section 203A).'' \4\
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\4\ 15 U.S.C. 80b-3a(c).
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4. Applicant states that it does not qualify for SEC registration.
Applicant states that it has no assets under management, does not act
as an investment adviser to a registered investment company, and does
not qualify for any exemption under rule 203A-2. Applicant also
maintains its principal office and place of business in Massachusetts,
which regulates its investment adviser activities.
5. Applicant states that it would be inconsistent with the purposes
of the Coordination Act to prohibit applicant from registering with the
SEC because it provides services to institutional clients whose
activities affect billions of dollars in assets and have a significant
effect on national securities markets. Applicant believes that it
exerts an influence on the national markets similar to that exerted by
both nationally recognized statistical rating organizations
(``NRSROs'') and pension consultants.
6. Applicant states that almost all of its clients are
institutional traders, sales people, bankers and money managers who
collectively move billions of dollars of assets through the fixed-
income, foreign exchange and capital markets. Applicant states that
institutional trading desks of national and international broker-
dealers and money managers that subscribe to applicant's real-time
analyses, commentary and trading recommendation publications use this
information to assist them in evaluating instruments and market
conditions when making purchase and sale decisions and determining
trading strategies. Applicant believes that purchases, sales, and
implementations of trading strategies result in billions of dollars of
fixed-income and foreign exchange transactions moving through the
national markets. Applicant also asserts that its clients, such as the
Federal Reserve Banks and other federal and state regulatory bodies,
exert their own special influence on the national markets.
7. Applicant states that the SEC exempted from the prohibition on
federal registration NRSROs recognizing that, although NRSROs only
provide impersonal advisory services and do not manage any assets,
these advisers'
[[Page 65727]]
activities have a significant effect on the national securities
markets, thereby making them appropriate candidates for federal
registration under the conceptual framework established by the
Coordination Act.\5\
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\5\ Rules Implementing Amendments to the Investment Advisers Act
of 1940, Investment Advisers Act Release No. 1601 (Dec. 20, 1996),
62 FR 68480 at Section II.D.1 (release proposing rules to implement
amendments to the Advisers Act).
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8. Applicant states that the SEC also exempted from the prohibition
on Federal registration pension consultants who provide investment
advice to plans with assets having an aggregate value of at least $50
million. Applicant states that, like NRSROs, pension consultants do not
exercise direct investment discretion over client portfolios, but their
advice affects the management of billions of dollars of assets.\6\
Applicant states that the SEC concluded that it would be inconsistent
with the purposes of the Coordination Act for pension consultants to be
regulated by the states rather than the federal government because of
their effect on national markets.
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\6\ Id. at Section II.D.2.
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9. Applicant also asserts that the states should have little or no
interest in regulating applicant, which has a majority of institutional
clients. Less than one-tenth of one percent of applicant's clients are
individual investors. Applicant submits that the primary interest of
the states is not in the protection of institutional clients.
10. Applicant states that, although the Coordination Act generally
preempts state law with respect to SEC-registered advisers and their
supervised persons, it does permit states to license, register or
otherwise qualify any ``investment adviser representative'' who has a
place of business within the state. Applicant asserts that the
Commission, in defining investment adviser representative, determined
that states should not regulate either those supervised persons who
service a predominantly institutional clientele or those who render
only impersonal services. Applicant believes that, by expanding the
class of advisers who qualify for federal registration and restricting
the class of supervised persons subject to state control, the SEC
effectuated Congress' intent to limit state regulation to activities
that have a primarily localized effect and that institutional advisory
activities be regulated by the federal government.
By the Commission.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-32653 Filed 12-12-97; 8:45 am]
BILLING CODE 8010-01-M
