BDs May Continue to Rely on RIAs for AML Customer Identification

In a recent No-Action Letter provided to SIFMA, the SEC extended relief allowing broker-dealers to rely on investment advisers to perform the customer identification functions of the required CIP program. Without the No-Action Relief (upon which broker-dealers have relied since 2004 but which expires this week), BDs could not rely on RIAs because RIAs are not subject to the AML laws. To rely on an investment adviser with a common client, the adviser must be registered and execute an agreement requiring annual certification that the RIA has implemented a compliant AML program. The extended relief automatically expires in a year.

OUR TAKE: This is certainly the right answer because as SIFMA points out, the RIA is in the best position to perform the CIP function and should not have to disclose confidential client information to a third party. To avoid this issue, we support an AML program requirement for investment advisers.

http://www.sec.gov/divisions/marketreg/mr-noaction/2010/sifma011110.pdf