April 28, 2017

SEC Guidance Clarifies Unibanco Documentation Requirements

By Diana E. McCarthy

The SEC staff recently issued an information update clarifying the representations and undertakings needed by unregistered foreign advisory affiliates of U.S.-registered advisers who rely on the Unibanco line of no-action letters.


The SEC released what is commonly referred to as the first Unibanco no-action letter in 1992, in which the staff provided assurances that it would not seek enforcement actions under Section 203(a) of the Advisers Act of 1940 (the “Act”) in cases where a non-U.S. advisory affiliate (“Participating Affiliate”) of a registered investment adviser shares personnel with, and provides certain services to U.S. clients through, the registered adviser without registering under the Act. Subsequent no-action letters followed in which the staff provided assurances based on different facts and circumstances.

One of the conditions of the Unibanco line of no-action letters is that the advisers must provide certain representations and undertakings to the SEC, in addition to maintaining records for SEC inspection and providing the Commission with access to non-U.S. personnel who are providing advisory services.

Guidance on Documentation

The SEC noted that the staff has received a variety of documentation over the years in connection with these representations and undertakings and was using the information update to provide the industry with guidance on representations and undertakings that clearly address the Unibanco concerns. The information update listed the following in this regard:

  • Name of the Participating Affiliate and registered adviser and a representation that the Participating Affiliate is an “associated person” under Section 202(a)(17) of the Act. An associated person is a partner, officer, director (or any person performing similar functions), or any person directly or indirectly controlling or controlled by the adviser, including non-clerical or ministerial employees.
  • Representation and documentation of the designation and appointment, without power of revocation, of an agent for service of process (“Agent”) by the Participating Affiliate, including name and contact information. The Agent must be designated with the power to be served with all process, pleadings or other papers in connection with any SEC investigation or administrative proceeding, and any civil suit or action brought against the Participating Affiliate or registered adviser or in which the Participating Affiliate is a defendant or respondent in any court in the U.S., or its territories or possessions.
  • Representation that the Participating Affiliate is under the jurisdiction of U.S. courts for actions arising, directly or indirectly, under U.S. or state securities laws in connection with: (1) investment advisory activities; (2) related securities activities; and (3) related transactions.
  • Representation that any civil suit or action or administrative proceeding may be commenced through service of process on the Agent and that such service will be valid, effective and binding in all courts and administrative tribunals as if personal service had been made.
  • Representation that a Participating Affiliate will appoint a successor Agent if the Agent is discharged or is unwilling or unable to accept service at any time until six years after the date of the last investment advisory activity. The SEC must be notified of any change in the Agent and its contact information.
  • Representation that the Participating Affiliate will promptly, upon request of the Commission, in a routine or special inspection provide the staff with any and all books and records required to be maintained by staff guidance, and make employees of the Participating Affiliate involved in providing investment advisory activities (excluding clerical/ministerial employees) available for testimony before, or other questioning by, the Commission and staff.
  • Representation that the Participating Affiliate will produce any documents in accordance with staff guidance pursuant to an administrative subpoena or request for voluntary cooperation.

* * * *

For the first time, the SEC has provided a format for submitting information regarding the Unibanco representations and undertakings to the Commission. The guidance states that this information can be submitted to the SEC by email at IMOCC@sec.gov, with the subject line referencing “Participating Affiliate.”

Prior to this guidance, the SEC acknowledged to practitioners that it had no formal method for receiving representations and undertakings. It now appears that the staff has determined to formalize the process, although it is unclear what prompted this change. U.S. investment advisers might want to consider reviewing current representations and undertakings with their Participating Affiliates to ensure that they comply with this guidance.

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