The SEC has finalized Rule 206(3)-3T under the Investment Advisers Act of 1940 (“the Act”). The new rule is a short term remedy - expiring December 31, 2010 – and allows dual registrants to act in principal capacity with advisory clients. For non-discretionary accounts, an investment adviser also registered as a broker-dealer would comply with the Act’s principal trading rule by meeting, among other obligations, the following criteria:

• Providing written disclosure to clients regarding the conflicts arising from principal trades
• Obtaining written consent from the client authorizing the adviser to enter into principal transactions
• Making certain disclosures orally or in writing and obtaining the client’s consent before each principal transaction
• Sending confirmation statements with the proper disclosures and stating that the client authorized the transaction
• Delivering an annual report to the client that details the principal transactions made during the year

View SEC Release on Final Rule 206(3)-3T

FrontLine Compliance, LLC is a regulatory compliance consulting firm of former high-level regulatory insiders offering customized services to broker-dealers, investment advisers, investment companies, hedge funds, and insurance company affiliates. Staffed by former SEC and FINRA regulators, and chief compliance officers, FrontLine Compliance provides the kind of industry knowledge, experience and expertise on regulatory issues only available from well-seasoned insiders. For more information about the firm, please visit www.frontlinecompliance.com.

FrontLine Compliance, LLC
phone: 888-518-8070
email: info@frontlinecompliance.com
www.frontlinecompliance.com
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