2 

July 15, 2013 

IM Ref. No. 201313711924 

RESPONSE OF THE OFFICE OF CHIEF COUNSEL Wells Fargo Bank, N.A. 

DIVISION OF INVESTMENT MANAGEMENT File No. 801-72865 

We would not recommend enforcement action to the United States Securities and 

Exchange Commission (" Commission") under Section 206(4) ofthe Investment Advisers 

Act of 1940 ("Advisers Act") and Rule 206( 4)-3 thereunder if any investment adviser 

that is required to be registered pursuant to Section 203 ofthe Advisers Act pays to Wells 

Fargo Bank, N.A. ("Wells Fargo Bank") or any of its associated persons, as defined in 

Section 202(a)(17) ofthe Advisers Act, a cash solicitation fee, directly or indirectly, for 

the solicitation of advisory clients in accordance with Rule 206( 4)-3, 1 notwithstanding an 

injunctive order issued by the United States District Court for the Northern District of 

California (the "Judgment") that otherwise would preclude such an investment adviser 

from paying such a fee, directly or indirectly, to Wells Fargo Bank or certain related 

2 

persons. 

Our position is based on the facts and representatjons in your letter dated July 15, 2013, 

particularly the representations of Wells Fargo Bank that: 

(1) 	 it or any person associated with it will conductany-cash-:;ulicitati-o,n---------­

arrangement entered into with any investment adviser registered or 

required to be registered under Section 203 ofthe Advisers Act in 

compliance with the terms of Rule 206(4)-3, except for the investment 

adviser's payment of cash solicitation fees, directly or indirectly, to Wells 

Fargo Bank, which is subject to the Judgment; 

(2) 	 the Judgment does not bar or suspend Wells Fargo Bank or any person 


currently associated with Wells Fargo Bank from acting in any capacity 


under the federal securities laws;3 


Rule 206(4)-3 prohibits any investment adviser that is required to be registered under the Advisers 


Act from paying a cash fee , directly or indirectly, to any solicitor with respect to solicitation 


activities if, among other things, the solicitor is subject to an order, judgment or decree described 


in Section 203(e)(4) ofthe Advisers Act. 


Gutierrez v. Wells Fargo Bank, N.A., Case No. C 07-05923 WHA (N.D.Cal.) (May 14, 2013). 

Section 9(a)(2) of the Investment Company Act of 1940 (the "Investment Company Act") 


provides, in pertinent part, that a person may not serve or act as, among other things, an 


investment adviser or depositor of any investment company registered under the Investment 


Company Act or a principal underwriter for any registered open-end investment company or 


registered unit investment trust if, among other things, that person, by reason of any misconduct, is 


permanently or temporarily enjoined from acting, among other things, as an underwriter, broker, 


dealer, investment adviser or bank, or from engaging in or continuing any conduct or practice in 


conneCtion with any such activity, or in connection with the purchase or sale of any security. 


Section 9(a)(3) extends the prohibition to any company any affiliated person of which is 


disqualified pursuant to Section 9(a)(2). 


Effective November 4, 2022, This Letter is Withdrawn. Please consult the following 

web page for more information: 

https://www.sec.gov/divisions/investment/im-modified-withdrawn-staff-statements
(3) 	 it will comply with the terms of the Judgment; and 

(4) 	 for ten years from the effective date ofthe Judgment, Wells Fargo Bank or 

any person associated with it or any investment adviser .with which Wells 

Fargo Bank or any person associated with it has a solicitation arrangement 

subject to Rule 206(4)-3 will disclose the Judgment in a written document 

that is delivered to each person whom Wells Fargo Bank or any person 

associated with it solicits (a) not less than 48 hours before the person 

enters into a written or oral investment advisory contract with the 

investment adviser or (b) at the time the person enters into such a contract, 

ifthe person has the right to terminate such contract without penalty 

within 5 business days after entering into the contract. 

This position applies only to the Judgment and not to any other basis for disqualification 

under Rule 206(4)-3 that may exist or arise with respect to Wells Fargo Bank or any of its 

associated persons. 

Adam Glazer 

Senior Counsel 

The Judgment, absent the issuance of an order by the Commission pursuant to Section 9( c) of the 

Investment Company Act that exempts Wells Fargo Bank from the provisions of Section 9(a) of 

the Investment Company Act, would effectively prohibit Wells. Fargo Bank and companies of 

which it is an affiliated person from acting in any of the capacities set forth in Section 9(a) of the 

Investment Company Act. You state that, pursuant to Section 9( c) of the Investment Company 

Act, Wells Fargo Bank and certain affiliated persons, on behalf of themselves and future affiliated 

persons, submitted an application to the Commission requesting (i) an order of temporary 

exemption from Section 9(a) of the Investment Company Act and (ii) a permanent order 

exempting such persons from the provisions of Section 9(a) of the Investment Company Act. 

On July 15,2013, the Division, acting under delegated authority, issued an order granting Wells 

Fargo Bank, certain affiliated persons and future affiliated persons a temporary exemption from 

Section 9(a) of the Investment Company Act pursuant to Section 9(c) of the Investment Company 

Act, with respect to the Judgment, until the date the Commission takes fmal action on the 

application for a permanent order or, if earlier, September 13, 2013. In re Wells Fargo Bank, 

NA., eta/., SEC Rei. No. IC-30600 (July 15, 2013). Therefore, Wells Fargo Bank, certain 

affiliated persons and future affiliated persons are not currently barred or suspended from acting in 

any capacity specified in Section 9(a) ofthe Investment Company Act as a result of the Judgment. 

2 

July 15, 2013 

ByE-mail 

Douglas J. Scheidt 

Associate Director and Chief Counsel 

Division of Investment Management 

U.S. Securities and Exchange Commission 

100 F Street, N.E. 

Washington, D.C. 20549 

Re: 	 Gutierrez v. Wells Fargo Bank, N.A., Case No. C 07-05923 WHA (N.D. 

Cal., May 14, 2013)- Request for Relief under Rule 206(4)-3 under the 

Investment Advisers Act of 1940 

Dear Mr. Scheidt: 

This letter is submitted on behalf of our client, Wells Fargo Bank, N.A. ("Wells Fargo 

Bank"), in connection with the entry of an order ("Court Order") by the United States District 

Court for the Northern District of California ("District Court") in connection with the abovecaptioned certified consumer class action ("Action"). The Court Order, among other things, 

enjoins Wells Fargo Bank (the "Injunction") from making or disseminating, or permitting to be 

made or disseminated, any false or misleading representations relating to the posting order of 

debit-card purchases, checks and automated clearing house ("ACH") transactions in its customer 

bank accounts. The court has set the effective date of the Injunction as July 15, 2013. 

Wells Fargo Bank is registered as an investment adviser under Section 203 of the 

Investment Advisers Act of 1940, as amended (the "Advisers Act").' Further, certain associated 

persons (as defined in Section 202(a)(17) of the Advisers Act) ofWells Fargo Bank currently 

engage in cash solicitation activities that are subject to Rule 206(4)-3 under the Advisers Act (the 

"Rule").2 Accordingly, Wells Fargo Bank seeks the assurance of the Staff of the Division of 

Investment Management (the "Staff') that it would not recommend any enforcement action to the 

U.S. Securities and Exchange Commission ("Commission") under Section 206(4) of the 

Advisers Act or the Rule, if an investment adviser that is required to be registered pursuant to 

Section 203 of the Advisers Act, pays Wells Fargo Bank or any of its associated persons, directly 

or indirectly, a cash solicitation fee pursuant to the Rule, notwithstanding the existence of the 

1 Each of two separately identifiable departments within Wells Fargo Bank, Abbot Downing Investment Advisors 

(SEC No. 801-72865) and Wells Capital Management Singapore (SEC No. 801-76987), is registered as an 

investment adviser under Section 203 of the Advisers Act. 

2 Section 202(a)(17) of the Advisers Act defines a "person associated with an investment adviser" to mean, among 

other things, any person directly or indirectly controlling or controlled by such investment adviser. 

DC-9709578 v9 

klgates.com 
Douglas J. Scheidt 

July 15, 2013 

Page 2 

Court Order, which could otherwise preclude such an investment adviser from paying such a fee, 

directly or indirectly, to Wells Fargo Bank or certain related persons. 

While the Court Order does not operate to prohibit or suspend Wells Fargo Bank or its 

associated persons from acting as, or being associated with, an investment adviser and does not 

relate to solicitation activities on behalf of any investment adviser, the Court Order may affect 

the ability of Wells Fargo Bank and its associated persons to receive cash solicitation fees. 3 The 

Rule prohibits an investment adviser that is required to be registered under the Advisers Act 

from paying such fees to any solicitor that "is subject to an order, judgment or decree described 

in Section 203(e)(4) of the [Advisers] Act." Section 203(e)(4), in relevant part, provides that the 

Commission, by order, shall take certain actions against "any investment adviser. .. or any person 

associated with such investment adviser," if such investment adviser or associated person thereof 

has been "permanently or temporarily enjoined by order, judgment, or decree of any court of 

competent jurisdiction ... from acting as ... an affiliated person ... of any ... bank ... , or from 

engaging in or continuing any conduct or practice in connection with any such activity." 

Accordingly, the Injunction against Wells Fargo Bank from making or disseminating, or 

permitting to be made or disseminated, any false or misleading representations relating to the 

posting order of debit-card purchases, checks and ACH transactions in its customer bank 

accounts, which may be deemed to be conduct or practices in connection with the banking 

activities of Wells Fargo Bank, could cause Wells Fargo Bank and its associated persons to be 

disqualified under the Rule. Accordingly, absent no-action relief, Wells Fargo Bank and its 

associated persons may be unable to receive cash payments, directly or indirectly, from advisers 

required to be registered for the solicitation of advisory clients. 

BACKGROUND 

On May 14, 2013, the United States District Court for the Northern District of California 

issued the Court Order, enjoining Wells Fargo Bank from "making or disseminating, or 

permitting to be made or disseminated, any false or misleading representations relating to the 

3 Under Section 9(a) of the Investment Company Act of 1940 ("1940 Act"), Wells Fargo Bank and its affiliated 

persons will, as a result of the Injunction, be prohibited from serving or acting as, among other things, an investment 

adviser or depositor of any registered investment company or principal underwriter for any registered open-end 

investment company or registered unit investment trust. Wells Fargo Bank and its affiliated persons who act in the 

capacities set forth in Section 9(a) have filed an application under Section 9(c) of the 1940 Act requesting the 

Commission to issue both temporary and permanent orders exempting them, and Wells Fargo Bank's future 

affiliated persons should any of them serve or act in any of the capacities set forth in Section 9(a) in the future, from 

the restrictions of Section 9(a). The applicants believe that they meet the standards for exemptive relief under 

Section 9(c). On July 15, 2013, the Staff, acting under delegated authority, issued an order granting Wells Fargo 

Bank and certain affiliated persons a temporary exemption from Section 9(a) of the 1940 Act pursuant to Section 

9(c) of the 1940 Act, with respect to the Injunction, effective July 15, 2013 until the date the Commission takes final 

action on the application for a permanent order or, if earlier, September 13, 2013. Investment Company Act Release 

No. 30600 (July 15, 2013). 
Douglas J. Scheidt 

July 15, 2013 

Page 3 

posting order of debit-card purchases, checks and ACH transactions in its customer bank 

accounts."4 The Court Order sets the effective date of the Injunction as July 15, 2013. 

The Court Order was issued in a certified consumer class action under Section 17200 of 

the California Business and Professions Code relating to a Wells Fargo Bank bookkeeping 

device known as "high-to-low" posting. 5 The plaintiffs in the class action alleged that Wells 

Fargo Bank, without adequate disclosure to account holders, posted debit card transactions 

received each day for payment beginning with the highest amount and ending with the lowest 

amount (i.e., high-to-low), which could have the effect of increasing the number of items posting 

into overdraft and, therefore, increased overdrafts fees. 6 While the plaintiffs' challenge to the 

practice of high-to-low posting and to the adequacy of the bank's disclosures was found to be 

preempted by the National Bank Act, Wells Fargo Bank was found liable under the California 

law for making misleading statements regarding the practice.7 The Court Order requires Wells 

Fargo Bank to pay restitution of $202,994,035.46 (plus post-judgment interest) and enjoins 

Wells Fargo Bank from making or disseminating, or permitting to be made or disseminated, any 

false or misleading representations relating to the posting order of debit-card purchases, checks, 

and ACH transactions in its customer bank accounts. 

DISCUSSION 

In the adopting release for the Rule, the Commission stated that it "would entertain, and 

be prepared to grant in appropriate circumstances, requests for permission to engage as a 

solicitor a person subject to a statutory bar."8 We respectfully submit that the circumstances 

presented in this case are precisely the sort that warrant a grant of no-action relief. 

The Rule's proposing and adopting releases explain the Commission's purpose in 

including the disqualification provisions in the Rule. The purpose was to prevent an investment 

adviser from hiring as a solicitor a person whom the adviser was not permitted to hire as an 

employee, thus doing indirectly what the adviser could not do directly. In the proposing release, 

the Commission stated that: 

[b ]ecause it would be inappropriate for an investment adviser to be 

permitted to employ indirectly, as a solicitor, someone whom it 

4 Gutierrez v. Wells Fargo Bank, N.A., Case No. C 07-05923 WHA (N.D. Cal., May 14, 2013) (granting in part and 

denying in part motion for judgment following remand). 

5 !d. at 1. 

7 !d. at 3 (citing Gutierrez v. Wells Fargo Bank, N.A., 704 F.3d 712, 725-730 (9 1

h Cir. 2012)). 

8 See Requirements Governing Payments of Cash Referral Fees by Investment Advisers, lnv. Adv. Act Rei. No. 688 

(July 12, 1979), 17 S.E.C. Docket (CCH) 1293, 1295. 
Douglas J. Scheidt 

July 15, 2013 

Page4 

might not be able to hire as an employee, the Rule prohibits 

payment of a referral fee to someone who ... has engaged in any of 

the conduct set forth in Section 203(e) of the [Advisers] Act ... 

and therefore could be the subject of a Commission order barring 

or suspending the right of such person to be associated with an 

investment adviser. 9 

The Court Order does not bar, suspend, or limit Wells Fargo Bank or any person 

currently associated with it from acting in any capacity under the federal securities laws. 10 Wells 

Fargo Bank has not been sanctioned for activities relating to conduct as an investment adviser or 

relating to solicitation of advisory clients. The Court Order does not pertain to advisory 

activities. Accordingly, consistent with the Commission's reasoning, there does not appear to be 

any reason to prohibit an adviser from paying Wells Fargo Bank or its associated persons for 

engaging in solicitation activities under the Rule. 

The Staff previously has granted numerous requests for no-action relief from the 

disqualification provisions of the Rule to individuals and entities disqualified from receiving 

cash solicitation fees pursuant to the Rule due to t~eir status as an investment adviser, or an 

associated person of an investment adviser, that is subject to an order, judgment or decree of a 

court of competent jurisdiction, enjoining the adviser or associated person from engaging in or 

continuing a conduct or practice described in Section 203( e)( 4) of the Advisers Act. 11 fudeed, 

9 See Requirements Governing Payments of Cash Referral Fees by Investment Advisers, Inv. Adv. Act Rei. No. 615 

(Feb. 2, 1978), 14 S.E.C. Docket (CCH) 89, 91. 

10 See supra note 3. 

11 See, e.g., J.P. Morgan Securities LLC, SEC No-Action Letter (pub. avail. Jan. 9, 2013); Wells Fargo Bank, N.A., 

SEC No-Action Letter (pub. avail. Sept. 21, 2012); J.P. Turner and Company, L.L.C. et al., SEC No-Action Letter 

(pub. avail. Sept. 10, 2012); GE Funding Capital Market Services, Inc., SEC No-Action Letter (pub. avail. Jan. 25, 

2012); J.P. Morgan Securities LLC, SEC No-Action Letter (pub. avail. July 11, 2011); J.P. Morgan Securities LLC, 

SEC No-Action Letter (pub. avail. June 29, 2011); BAC Home Loans Servicing, LP, SEC No-Action Letter (pub. 

avail. June 2, 2011) ("BAC Letter"); UBS Financial Services Inc., SEC No-Action Letter (pub. avail. May 9, 2011); 

Citigroup Inc., SEC No-Action Letter (pub. avail. Oct. 22, 2010); Bane of America Investment Services, Inc., SEC 

No-Action Letter (pub. avail. June 10, 2009); Barclays Bank PLC, SEC No-Action Letter (pub. avail. June 6, 2007); 

Morgan Stanley & Co. Incorporated, SEC No-Action Letter (pub. avail. May 15, 2006); American International 

Group, Inc., SEC No-Action Letter (pub. avail. Feb 21, 2006); Goldman, Sachs & Co., SEC No-Action Letter (pub. 

avail. Feb. 23, 2005); Morgan Stanley & Co. Incorporated, SEC No-Action Letter (pub. avail. Feb. 4, 2005); Prime 

Advisors, Inc.; SEC No-Action Letter (pub. avail. Nov. 8, 2001); Legg Mason Wood Walker, Inc., SEC No-Action 

Letter (pub. avail. June 11, 2001); Dreyfus Corp., SEC No-Actiori Letter (pub. avail. March 9, 2001); UBS 

Securities Inc., SEC No-Action Letter (pub. avail. Feb. 7, 2001); Tucker Anthony Inc., SEC No-Action Letter (pub. 

avail. Dec. 21, 2000); J.B. Hanauer & Co., SEC No-Action Letter (pub. avail. Dec. 12, 2000); Founders Asset 

Management LLC, SEC No-Action Letter (pub. avail. Nov. 8, 2000); Credit Suisse First Boston Corp., SEC NoAction Letter (pub avail. Aug. 24, 2000); Janney Montgomery Scott LLC, SEC No-Action Letter (pub. avail. July 

18, 2000); Aeltus Investment Management, Inc., SEC No-Action Letter (pub. avail. July 17, 2000); William R. 

Hough & Co., SEC No-Action Letter (pub. avail. Apr. 13, 2000); In the Matter of Certain Municipal Bond 

Refundings, SEC No-Action Letter (pub. avail. Apr. 13, 2000). 
Douglas J. Scheidt 

July 15, 2013 

Page 5 

many of the requests previously granted by the Staff have been granted to individuals or entities 

disqualified from receiving cash solicitation fees pursuant to the Rule due to their status as an 

investment adviser, or an associated person of an investment adviser, subject to an order 

enjoining the adviser or associated person from engaging in or continuing a conduct or practice 

in connection with the purchase or sale of a security. 12 Here, the conduct underlying the 

Injunction relates to Wells Fargo Bank's banking activities. Accordingly, the basis for granting 

the no-action relief requested by Wells Fargo Bank, on behalf of itself and its associated persons, 

is arguably stronger, and under the circumstances, warranted. 

UNDERTAKINGS 

In connection with this request, Wells Fargo Bank undertakes: 

1. 	 To conduct any cash solicitation arrangement entered into with any 

adviser registered or required to be registered under Section 203 of the 

Advisers Act in compliance with the terms of Rule 206(4)-3, except for 

the investment adviser's payment of cash solicitation fees, directly or 

indirectly, to Wells Fargo Bank, which is subject to the Court Order; 

2. 	 To comply with the terms of the Court Order; and 

3. 	 That for ten years from the effective date of the Injunction, Wells Fargo 

Bank and any person associated with it and any investment adviser with 

which it or any person associated with it has a solicitation arrangement 

subject to Rule 206(4)-3 will disclose the Court Order in a written 

document that is delivered to each person whom Wells Fargo Bank or any 

person associated with it solicits (a) not less than 48 hours before the 

person enters into a written or oral investment advisory contract with the 

investment adviser or (b) at the time the person enters into a written or oral 

advisory contract with the investment adviser, if the person has the right to 

terminate such contract without penalty within 5 business days after 

entering into the contract. 

* * * * * 

In light of the foregoing, we respectfully request that the Staff advise us that it will not 

recommend enforcement action to the Commission if an investment adviser that is required to be 

registered with the Commission pays Wells Fargo Bank, or any of its associated persons, a cash 

payment for the solicitation of advisory clients, notwithstanding the Court Order. 

12 Wells Fargo Bank seeks the relief based on the Injunction enjoining it "from acting as ... an affiliated person ... 

of any ... bank ... , or from engaging in or continuing any conduct or practice in connection with any such activity." 

See 15 U.S.C. 80b-3(e)(4). In short, Wells Fargo Bank seeks the relief because in Section 203(e)(4) "such activity" 

appears to refer to any activity of a bank, regardless of whether it relates to the purchase or sale of a security. 
Douglas J. Scheidt 

July 15, 2013 

Page 6 

If you have any questions regarding this request, please contact the undersigned at (202) 

778-9475. 

Sincerely, 

cc: 	 Nadya B. Roytblat 

Adam Glazer 

U.S. Securities and Exchange Commission 

Charles S. Neal 

Douglas R. Edwards 

Wells Fargo Law Department