[Federal Register Volume 62, Number 120 (Monday, June 23, 1997)]
[Notices]
[Pages 33945-33946]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-16336]
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SECURITIES AND EXCHANGE COMMISSION
[Rel. No. IA-1639/803-106]
KPMG Investment Advisors; Notice of Application
June 17, 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: KPMG Investment Advisers (``KPMGIA'').
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
continue to be registered with the SEC as an investment adviser.
FILING DATES: The application was filed on March 7, 1997, and amended
on June 5, 1997. By letter dated June 17, 1997, applicant's counsel
stated that an additional amendment, the substance of which is
incorporated herein, will be filed during the notice period.
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 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 July 7, 1997,
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, 4200 Norwest Center, 90 South Seventh Street,
Minneapolis, Minnesota 55402.
FOR FURTHER INFORMATION CONTACT: Jennifer S. Choi, Special Counsel, at
(202) 942-0725 (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 general partnership owned by KPMG Peat Marwick
LLP (``KPMG''). KPMG provides accounting and related services to
individuals and entities in the private and public sectors throughout
the United States.
2. Since December 13, 1994, applicant has been registered with the
SEC as an investment adviser. Applicant's principal place of business
is in Minneapolis, Minnesota, and it has approximately 32 registered
advisory representatives conducting business from 19 offices located in
13 states and Puerto Rico.
3. Applicant is responsible for the investment advice component of
the personal financial planning services offered by KPMG. Applicant
supervises the delivery of investment advice by partners and
professional employees of KPMG in connection with personal financial
planning services offered by KPMG to its clients, and the scope,
content and delivery of such advice is subject to quality control
standards prescribed and monitored by applicant.
4. Applicant does not manage or exercise discretionary authority
over clients' accounts or maintain custody of clients' funds or
securities. In instances where clients seek or would benefit from
specific advice on securities investments, applicant may present the
client with a list of investment advisers that specialize in providing
such advice from which the client may choose.
5. Applicant provides generic advice on securities of all types but
does not recommend specific securities. At the request of a client,
applicant would provide an analysis of the attributes of a specific
security without recommendation as to whether a client should buy, sell
or hold the security. With regard to mutual funds, applicant may assist
a client in identifying categories of funds that match the client's
individual profile. Applicant does not select mutual funds for clients.
If a client's needs dictate, applicant would, using published ranking
data, assist the client in selecting several mutual funds in each
investment category for further consideration. The client would then
have the opportunity to compare the investment philosophy, past
performance, and other features and services of the funds before making
the investment decision. Applicant would discuss the use of
professional money managers with clients with an investable asset base
in excess of $250,000. Applicant also provides asset allocation
services and ongoing performance evaluations.
6. Applicant's fees are generally based on actual or estimated
hourly charges, which vary according to the staff classification,
experience and location of the individual providing the service.
Applicant's Legal Analysis
1. Under section 203A(a) of the Advisers Act, which would become
effective July 8, 1997, as a consequence of the enactment on October
11, 1996 of the National Securities Markets Improvement Act of 1996,\1\
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 adviser (i) has assets under management of not less than
$25 million (or such higher amount as the SEC may, by rule, deem
appropriate), or (ii) is an adviser to an investment company registered
under the Investment Company Act of 1940, as amended. The SEC is
directed by section 203(h) of the Advisers Act to cancel the
registration of any adviser that no longer meets the criteria for
registration.
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\1\ The effective date of the National Securities Markets
Improvement Act of 1996, originally April 9, 1997, was extended to
July 8, 1997 by Pub. L. No. 105-8 (Mar. 31, 1997).
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2. Applicant states that it does not meet the statutory test of
having $25 million of assets under management. Applicant also states
that it does not act as an investment adviser to any registered
investment company. Applicant also states that it would not qualify for
exemption from the prohibition on SEC registration as provided in rule
203A-2 under the Advisers Act. Applicant states that it would not be
able to rely on the rule to relieve the burden of multi-state
registration because it does not qualify
[[Page 33946]]
for any of the four exemptions listed in rule 203A-2. Applicant,
therefore, requests exemptive relief.
3. Under section 203A(c), the SEC has the authority to permit an
investment adviser to register with the SEC if the application of the
prohibition would be unfair, a burden on interstate commerce, or
otherwise inconsistent with the purposes of section 203A. For the
reasons discussed below, applicant believes that the standards for
exemptive relief under section 203A(c) are met.
4. Applicant believes that Congress in adopting section 203A
intended the SEC to grant these exemptions to advisers having a
``national or multistate practice'' and that ``[l]arger advisers, with
national businesses, should be registered with the [SEC] and be subject
to national rules.''\2\ Applicant notes that the Advisers Act gives the
SEC primary responsibility to regulate advisers that remain registered
with the SEC by preempting certain state laws with respect to those
advisers.
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\2\ S. Rep. No. 293, 104th Cong. 2d Sess. 5 (1996).
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5. Applicant notes that the SEC's release adopting the rules
implementing the Coordination Act stated that Congress recognized that
``some advisers that do not have $25 million of assets under management
may still have national businesses.''\3\ As a result, the SEC was given
the ``authority to exempt advisers from the prohibition on [SEC]
registration if the application of the prohibition would be unfair, a
burden on interstate commerce or otherwise inconsistent with the
purposes of section 203A.'' \4\
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\3\ Rules Implementing Amendments to the Investment Advisers Act
of 1940, Investment Advisers Act Rel. No. 1633 (May 15, 1997), 62 FR
28112 (May 22, 1997).
\4\ Id.
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6. Applicant submits that the nature of its business consists of a
national or multistate practice that Congress intended to be regulated
by the SEC and not at the state level. Applicant states that it
currently supervises services provided through 19 offices in 13 states
by approximately 32 advisory representatives. Applicant believes that
although it does not provide discretionary management services to its
clients, the services provided are national in scope.
7. Applicant asserts that the purpose of the $25 million test was
to limit SEC regulation of advisers likely to be subject to multiple
state registration requirements. Applicant believes that if the
requested relief is not granted, it would continue to be subject to a
multitude of state requirements, a result which is inconsistent with
the purpose of section 203A to preempt certain state laws insofar as
they relate to advisers with a multi-state practice.
8. Applicant further submits that the national de minimis standard
embodied in section 222(d) of the Advisers Act provides little or no
relief from the burdens of multi-state registration. Pursuant to
section 222(d), a state may not require applicant to register as an
investment adviser if applicant does not have a place of business
located within that state and, during the preceding 12 month period,
had fewer than 6 clients who are residents of that state. Applicant
states that it has had, during the past 12 months, at least 6 state-
resident clients in each of the 17 states and the District of Columbia
in which applicant does not currently maintain an office. As a result,
applicant believes that it currently would be required to register in
30 states and the District of Columbia, including the 13 states in
which applicant maintains an office. Even after giving effect to all
state-adopted exemptions that are more liberal than the national de
minimis standard, applicant represents that, as of July 8, 1997, it
would be required to register in 30 states and the District of
Columbia.
9. Finally, applicant also submits other grounds for granting an
exemption under section 203A. Applicant believes that prohibiting it
from registering with the SEC would be unfair or a burden on interstate
commerce in that advisers with fewer clients and a much more local
practice than applicant's national presence would enjoy the benefits of
state law preemption, while applicant would be compelled to expend the
considerable resources required to constantly monitor and enforce
compliance with the state regulations to which it would be subject.
For the SEC, by the Division of Investment Management, under
delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-16336 Filed 6-20-97; 8:45 am]
BILLING CODE 8010-01-M
