December 9, 2022

Mr. Bernard V. Canepa

Managing Director and Associate General Counsel

Securities Industry and Financial Markets Association

1099 New York Avenue, NW, 6th Floor

Washington, DC 20001 

Re: Request for No-Action Relief Under Broker-Dealer Customer 

Identification Program Rule (31 C.F.R. § 1023.220) and Beneficial 

Ownership Requirements for Legal Entity Customers (31 C.F.R. § 

1010.230)

Dear Mr. Canepa: 

In your letter dated December 6, 2022 you request assurances that the staff 

of the Division of Trading and Markets (the “Division”) will not recommend 

enforcement action to the Securities and Exchange Commission (the “SEC” or the 

“Commission”) under Rule 17a-8 under the Securities Exchange Act of 1934 

(“Exchange Act”) if a broker-dealer relies on a registered investment adviser to

perform some or all of its obligations under the customer identification program 

(“CIP”) rule, 31 C.F.R. § 1023.220 (“CIP Rule”), and/or the portion of the customer 

due diligence rule regarding beneficial ownership requirements for legal entity 

customers, 31 C.F.R. § 1010.230 (“Beneficial Ownership Requirements”), subject to 

certain enumerated conditions set forth in your incoming letter. Specifically, you 

request that the Division extend the effectiveness of a no-action position that it took 

in 2020, which is substantially similar to previous no-action positions first taken by 

the Division in 2004, and also applied the principles underlying that position to the 

Beneficial Ownership Requirements in 2016.1

 

1

 See Letter from Annette L. Nazareth, Director, Division of Market Regulation, SEC, to Alan 

Sorcher, Securities Industry Association, dated Feb. 12, 2004 (the “2004 Letter”); Letter from Annette L. 

Nazareth, Director, Division of Market Regulation, SEC, to Alan Sorcher, Securities Industry Association, 

dated Feb. 10, 2005; Letter from Robert L.D. Colby, Acting Director, Division of Market Regulation, SEC, 

to Alan Sorcher, Securities Industry Association, dated Jul. 11, 2006; Letter from Erik Sirri, Director, 

Division of Trading and Markets, SEC, to Alan Sorcher, Securities Industry and Financial Markets 

Association (“SIFMA”), dated Jan. 12, 2008; Letter from Daniel M. Gallagher, Jr., Deputy Director, 

Division of Trading and Markets, SEC, to Ryan Foster, SIFMA, dated Jan. 11, 2010; Letter from Lourdes 

Gonzalez, Acting Co-Chief Counsel, Division of Trading and Markets, SEC, to Ryan Foster, SIFMA, dated 
On February 12, 2004, the Division, in consultation with the Department of 

Treasury’s Financial Crimes Enforcement Network (“FinCEN”), issued a letter 

stating that it would not recommend enforcement action to the Commission if a 

broker-dealer treated a registered investment adviser as if it were subject to an 

anti-money laundering program rule under 31 U.S.C. § 5318(h) (“AML Program 

Rule”) for the purposes of paragraph (b)(6) (now (a)(6)) of the CIP Rule. By its 

terms, the 2004 Letter was to be withdrawn without further notice on the earlier of: 

(1) the date upon which an AML Program Rule for investment advisers becomes 

effective, or (2) February 12, 2005. Because an AML Program Rule for investment 

advisers did not become effective, and in response to your subsequent requests for 

no-action relief, the effectiveness of the no-action position in the 2004 Letter has 

been extended a number of times in substantially the same form since 2004 and 

subject to certain additional conditions in 2016, most recently for an additional two 

years on December 9, 2020.2

In your letter, you indicate that broker-dealers have come to rely on the noaction position that was taken in the Division’s previous letters with respect to the 

CIP Rule, and most recently with the granting of no-action relief with respect to the 

Beneficial Ownership Requirements. You ask that the Division extend the 

 

Jan. 11, 2011; Letter from Emily Westerberg Russell, Senior Special Counsel, Division of Trading and 

Markets, SEC, to Ira Hammerman, Senior Managing Director and General Counsel, SIFMA, dated Jan. 11, 

2013; Letter from Lourdes Gonzalez, Assistant Chief Counsel, Division of Trading and Markets, SEC, to 

Ira Hammerman, Executive Vice President and General Counsel, SIFMA, dated Jan. 9, 2015 (the “2015

Letter”); Letter from Emily Westerberg Russell, Senior Special Counsel, Division of Trading and Markets, 

SEC, to Aseel Rabie, Managing Director and Associate General Counsel, SIFMA, dated Dec. 12, 2016 (the 

“2016 Letter”); Letter from Emily Westerberg Russell, Senior Special Counsel, Division of Trading and 

Markets, SEC, to Aseel Rabie, Managing Director and Associate General Counsel, SIFMA, dated Dec. 12, 

2018 ; Letter from Lourdes Gonzalez, Assistant Chief Counsel, Division of Trading and Markets, SEC, to 

Aseel Rabie, Managing Director and Associate General Counsel, SIFMA, dated Dec. 9, 2020 (the “2020 

Letter”). 

2

 See id. In May 2016, FinCEN issued new rules to clarify and strengthen customer due diligence 

requirements for covered financial institutions, including broker-dealers. See Customer Due Diligence 

Requirements for Financial Institutions, 81 FR 29398 (May 11, 2016). These rules include Beneficial 

Ownership Requirements, which contain a reliance provision in paragraph (j) that is similar to the one 

contained in paragraph (a)(6) of the CIP Rule. Specifically, under paragraph (j) of the Beneficial 

Ownership Requirements, a covered financial institution may rely on the performance by another financial 

institution of the requirements of the rule, subject to certain conditions, including that the other financial 

institution is subject to an AML Program Rule. See 31 C.F.R. § 1010.230(j). Covered financial institutions 

had to comply with these rules by May 11, 2018. See Customer Due Diligence Requirements for Financial 

Institutions, 81 FR 29398 (May 11, 2016).
effectiveness of the no-action position taken in the 2020 Letter with respect to the 

CIP Rule and Beneficial Ownership Requirements.

Response

Without necessarily agreeing with your assertions, the Division, following 

further consultation with FinCEN staff, extends the effectiveness of the no-action

position in the 2020 Letter until two years from the date of this letter. 

Accordingly, the Division will not recommend enforcement action to the 

Commission under Exchange Act Rule 17a-8 if a broker-dealer treats an investment

adviser as if it were subject to an AML Program Rule for the purposes of paragraph 

(a)(6) of the CIP Rule and/or paragraph (j) of the Beneficial Ownership 

Requirements, provided that the other provisions of the CIP Rule and the Beneficial 

Ownership Requirements, respectively, are met, and: (1) the broker-dealer’s 

reliance on the investment adviser is reasonable under the circumstances, as 

discussed in more detail below; (2) the investment adviser is a U.S. investment 

adviser registered with the Commission under the Investment Advisers Act of 1940; 

and (3) the investment adviser enters into a contract with the broker-dealer in 

which the investment adviser agrees that: (a) it has implemented its own antimoney laundering program consistent with the requirements of 31 U.S.C. 5318(h) 

and will update such anti-money laundering program as necessary to implement 

changes in applicable laws and guidance, (b) it (or its agent) will perform the 

specified requirements of the broker-dealer’s CIP and/or the broker-dealer’s 

beneficial ownership procedures in a manner consistent with Section 326 of the USA 

PATRIOT Act3 and the Beneficial Ownership Requirements, respectively, (c) it will 

promptly disclose to the broker-dealer potentially suspicious or unusual activity 

detected as part of the CIP and/or beneficial ownership procedures being 

performed on the broker-dealer’s behalf in order to enable the broker-dealer to file 

a Suspicious Activity Report, as appropriate based on the broker-dealer’s judgment,4

(d) it will certify annually to the broker-dealer that the representations in the 

reliance agreement remain accurate and that it is in compliance with such 

representations, and (e) it will promptly provide its books and records relating 

 

3

 Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and 

Obstruct Terrorism Act of 2001 (“USA PATRIOT Act”), Pub. L. No. 107-56, 115 Stat. 296 (2001). 

4

 Firms are reminded that nothing in this no-action letter relieves a broker-dealer of its obligation to 

establish policies, procedures, and controls that are reasonably designed to detect and report suspicious 

activity that is attempted or conducted by, at, or through the broker-dealer. See 31 C.F.R. § 1023.320(a)(2).
to its performance of the CIP and/or beneficial ownership procedures to the 

Commission, to a self-regulatory organization that has jurisdiction over the brokerdealer, or to authorized law enforcement agencies, either directly or through the 

broker-dealer, at the request of (i) the broker-dealer, (ii) the Commission, (iii) a selfregulatory organization that has jurisdiction over the broker-dealer, or (iv) an 

authorized law enforcement agency.5 

As to the reasonableness of a broker-dealer’s reliance on an investment 

adviser, we understand that broker-dealers seeking to rely on the no-action position 

taken in this letter will undertake appropriate due diligence on the investment 

adviser that is commensurate with the broker-dealer’s assessment of the money 

laundering risk presented by the investment adviser and the investment adviser’s 

customer base. Such due diligence would be undertaken at the outset of the brokerdealer’s relationship with the investment adviser, and updated during the course of 

the relationship, as appropriate. 

Further, we expect that a broker-dealer’s assessment of the money 

laundering risk presented by an investment adviser and the investment adviser’s 

customer base would depend on the particular facts and circumstances. For 

example, in some instances, a broker-dealer may consider an affiliated investment 

adviser to present a lower money laundering risk than an unaffiliated investment 

adviser. The investment adviser’s status as an affiliate, however, is one of many 

factors that may be relevant to such a risk assessment, and an affiliated investment 

adviser may or may not present a lower money laundering risk, depending on the 

facts and circumstances.6 

 

5

 A broker-dealer that chooses not to avail itself of the relief being granted pursuant to this letter 

may still contractually delegate the implementation and operation of its CIP and beneficial ownership 

procedures to an investment adviser; however, the broker-dealer will remain solely responsible for assuring 

compliance with the CIP Rule and the Beneficial Ownership Requirements and therefore, must actively 

monitor the operation of its CIP and beneficial ownership procedures and assess their effectiveness. See

“Customer Identification Programs for Broker-Dealers,” Exchange Act Release No. 47752 (Apr. 29, 2003), 

68 FR 25113, 25123 n. 132 (May 9, 2003).

6

 See, e.g., United States Senate, Permanent Subcommittee on Investigations, Committee on 

Homeland Security and Governmental Affairs, “U.S. Vulnerabilities to Money Laundering, Drugs, and 

Terrorist Financing: HSBC Case History” (July 17, 2012), available at: 

http://www.hsgac.senate.gov/subcommittees/investigations/reports. 
This is a staff position with respect to enforcement action only and does not 

purport to express any legal conclusions. It may be withdrawn or modified if the 

staff determines that such action is necessary to be consistent with the Bank Secrecy 

Act and in the public interest, or if the staff determines that such action is necessary 

or appropriate in furtherance of the purposes of the Exchange Act. In addition, this 

position is based solely upon the representations you have made and is limited 

strictly to the facts and conditions described in your letter. Any different facts or 

circumstances may require a different response.

Sincerely,

Lourdes Gonzalez

Assistant Chief Counsel

Division of Trading and Markets

Attachment
New York 140 Broadway, 35th Floor | New York, NY 10005

Washington 1099 New York Avenue, NW, 6th Floor | Washington, DC 20001

www.sifma.org

December 6, 2022

Via Electronic Mail

Ms. Lourdes Gonzalez

Assistant Chief Counsel

Division of Trading and Markets 

U.S. Securities and Exchange Commission

100 F Street, N.E.

Washington, D.C. 20549

Re: Request for No-Action Relief under Broker-Dealer Customer Identification 

Program Rule (31 C.F.R. § 1023.220) and Beneficial Ownership Requirements 

for Legal Entity Customers (31 C.F.R. § 1010.230)

Dear Ms. Gonzalez:

On behalf of its member broker-dealers, the Securities Industry and Financial Markets Association 

(“SIFMA”)1hereby requests that the staff of the Division of Trading and Markets (the “Division”) of 

the U.S. Securities and Exchange Commission (the “SEC” or the “Commission”) extend the noaction relief currently in effect with respect to the reliance provisions of the customer identification 

program rule applicable to broker-dealers (the “CIP Rule”)2and the rule regarding beneficial 

ownership requirements for legal entity customers (the “Beneficial Ownership Rule”).3

Under the conditions of a letter dated December 9, 2020 (the “2020 No-Action Letter”),4 Division 

staff has granted no-action relief to broker-dealers that rely on SEC-registered investment advisers 

(“RIAs”) to perform some or all the requirements of the CIP Rule and the Beneficial Ownership 

Rule. No-action relief was originally granted with respect to the CIP Rule in 20045and has since 

1 SIFMA is the leading trade association for broker-dealers, investment banks and asset managers operating in the 

U.S. and global capital markets. On behalf of our industry’s nearly one million employees, we advocate for 

legislation, regulation and business policy affecting retail and institutional investors, equity and fixed income 

markets and related products and services. We serve as an industry coordinating body to promote fair and orderly 

markets, informed regulatory compliance, and efficient market operations and resiliency. We also provide a forum 

for industry policy and professional development. With offices in New York and Washington, D.C., SIFMA is the 

U.S. regional member of the Global Financial Markets Association. For more information, visit 

http://www.sifma.org/.

2 31 C.F.R. § 1023.220.

3 31 C.F.R. § 1010.230.

4 See Letter from Lourdes Gonzalez, SEC, to Aseel Rabie, Managing Director and Associate General Counsel, 

SIFMA, dated Dec. 9, 2020, https://www.sec.gov/divisions/marketreg/mr-noaction/2020/sifma-120920-17a8.pdf. 

5 See Letter from Annette L. Nazareth, Director, Division of Market Regulation, SEC, to Alan Sorcher, Vice 

President and Associate General Counsel, Securities Industry Association, dated Feb. 12, 2004.
Ms. Gonzalez

Assistant Chief Counsel

Division of Trading and Markets

December 6, 2022

Page 2 of 5

Page | 2

been extended several times.6 Under the 2020 No-Action Letter, the current relief, addressing the 

reliance provisions of both the CIP Rule and the Beneficial Ownership Rule, expires December 9, 

2022.

7

 Because broker-dealer firms continue to rely on this relief, we urge the Division staff to 

continue to make it available.

Background

As you know, the CIP Rule requires each broker-dealer to adopt a written customer identification 

program (“CIP”) that includes risk-based procedures for verifying the identity of each customer. The 

CIP Rule permits a broker-dealer to rely on another financial institution (including an affiliate) to 

perform CIP procedures with respect to shared customers. Such reliance is permissible under 

specified conditions, including that the relied-on financial institution is subject to an anti-money 

laundering program rule (an “AMLP Rule”) under 31 U.S.C. § 5318(h) of the Bank Secrecy Act (the 

“BSA”)8and is regulated by a federal functional regulator.9 The reliance provision is designed to 

permit financial institutions with shared customers to agree as to how they will allocate performance 

of the CIP requirements and, thereby, rely on one another to avoid unnecessary duplication of efforts 

with respect to a given customer.

Similarly, under the Beneficial Ownership Rule, each broker-dealer is required to establish and 

maintain written procedures that are reasonably designed to identify and verify the identity of the 

beneficial owners of legal entity customers. Under the same conditions as set forth in the CIP Rule, 

the Beneficial Ownership Rule permits a broker-dealer to rely on the performance by another 

financial institution (including an affiliate) of the requirements of the Beneficial Ownership Rule 

with respect to any legal entity customer of the broker-dealer that has an account or a similar 

business relationship with the other financial institution.10

6 See Letter from Nazareth to Sorcher, dated Feb. 10, 2005; Letter from Robert L.D. Colby, Acting Director, 

Division of Market Regulation, SEC, to Sorcher, dated July 11, 2006; Letter from Erik Sirri, Director, Division of 

Trading and Markets, SEC, to Sorcher, Vice President and Associate General Counsel, SIFMA, dated Jan. 10, 2008; 

Letter from Daniel M. Gallagher, Jr., Deputy Director, Division of Trading and Markets, SEC, to Ryan Foster, 

Manager, SIFMA, dated Jan. 11, 2010 (the “2010 No-Action Letter”); Letter from Lourdes Gonzalez, Acting CoChief Counsel, Division of Trading and Markets, SEC, to Foster, dated Jan. 11, 2011 (the “2011 No-Action Letter”); 

Letter from Westerberg Russell to Ira Hammerman, Senior Managing Director and General Counsel, SIFMA, dated 

Jan. 11, 2013 (the “2013 No-Action Letter”); Letter from Gonzalez to Hammerman, Executive Vice President and 

General Counsel, SIFMA, dated Jan. 9, 2015 (the “2015 No-Action Letter”); Letter from Westerberg Russell to 

Rabie, dated Dec. 12, 2016 (the “2016 No-Action Letter”); Letter from Westerberg Russell to Rabie, dated Dec. 12, 

2018 (the “2018 No-Action Letter”); and the 2020 No-Action Letter.

7 See the 2020 No-Action Letter at p. 3 (providing no-action relief for two years from the date of the letter).

8 31 U.S.C. § 5311 et seq.

9 See 31 C.F.R. § 1023.220(a)(6).

10 31 C.F.R. § 1010.230(j).
Ms. Gonzalez

Assistant Chief Counsel

Division of Trading and Markets

December 6, 2022

Page 3 of 5

Page | 3

Rationale for Relief

As indicated in our prior requests for no-action relief, SIFMA believes that the interaction between 

broker-dealers and RIAs is precisely the type of relationship intended to be covered by the reliance 

provisions. RIAs often have the most direct relationship with the customers they introduce to brokerdealers and are best able to obtain the necessary documentation and information from and about the 

customers. Moreover, RIAs are often reluctant to have a broker-dealer contact their customers

because they view the broker-dealer as a competitor. RIAs are thus best positioned to perform some 

or all of the requirements of the CIP Rule and particularly to perform requirements under the 

Beneficial Ownership Rule, which pertains to information not about a customer but about the 

beneficial owners of that customer.

RIAs are regulated by a federal functional regulator, and many have established anti-money 

laundering (“AML”) programs consistent with 31 U.S.C. § 5318(h).11 Permitting two regulated 

financial institutions with a common customer to rely on one another to perform some or all of the 

requirements under the CIP Rule and the Beneficial Ownership Rule avoids duplication of efforts 

and inefficient allocation of significant and costly resources. Extending the current no-action 

position with respect to the CIP Rule and the Beneficial Ownership Rule would appropriately 

recognize the interaction between broker-dealers and RIAs and allow broker-dealers to maintain 

existing practices concerning reliance on RIAs.

Conditions of Current Relief and Request for Extension

In the 2020 No-Action Letter, Division staff stated that it would not recommend enforcement action 

to the Commission if a broker-dealer treats an investment adviser as if it were subject to an AMLP 

Rule for the purposes of paragraph (a)(6) of the CIP Rule and/or paragraph (j) of the Beneficial 

11 At the time the CIP Rule became effective, RIAs were the subject of a proposed AMLP Rule that had not been 

finalized. See Anti-Money Laundering Programs for Investment Advisers, 68 Fed. Reg. 23646 (May 5, 2003). As a 

result, broker-dealers were not permitted to rely on RIAs under the CIP Rule. SIFMA sought no-action relief to 

permit such reliance, and the Division staff, in consultation with the Financial Crimes Enforcement Network 

(“FinCEN”), granted the 2004 relief cited above. FinCEN withdrew its 2003 proposal in 2008 and later issued a new 

proposal to subject RIAs to an AMLP Rule. See Withdrawal of the Notice of Proposed Rulemaking, 73 Fed. Reg. 

65568 (Nov. 4, 2008); Anti-Money Laundering Program and Suspicious Activity Report Filing Requirements for 

Registered Investment Advisers, 80 Fed. Reg. 52680 (Sept. 1, 2015). Extensions of the Division staff’s no-action 

relief to date include four occasions after FinCEN’s withdrawal of the 2003 proposal but prior to the issuance of the 

2015 proposal (see the 2010 No-Action Letter, 2011 No-Action Letter, 2013 No-Action Letter, and 2015 No-Action 

Letter), as well as three occasions since FinCEN’s issuance of the 2015 proposal (see the 2016 No-Action Letter,

2018 No-Action Letter, and 2020 No-Action Letter). An AMLP rule for RIAs does not appear to be ready in the 

next two years. The 2015 proposal is on the long-term regulatory agenda and Treasury is re-examining it as part of 

the U.S. Strategy on Countering Corruption (Dec. 2021), https://www.whitehouse.gov/wp-content/uploads/2021/12/

United-States-Strategy-on-Countering-Corruption.pdf.
Ms. Gonzalez

Assistant Chief Counsel

Division of Trading and Markets

December 6, 2022

Page 4 of 5

Page | 4

Ownership Rule, provided that the other provisions of the CIP Rule and the Beneficial Ownership 

Rule, respectively, are met, and:

(1) the broker-dealer’s reliance on the investment adviser is reasonable under the 

circumstances12;

(2) the investment adviser is a U.S. investment adviser registered with the Commission under 

the Investment Advisers Act of 1940, as amended; and 

(3) the investment adviser enters into a contract with the broker-dealer in which the 

investment adviser agrees that:

(a) it has implemented its own AML program consistent with the requirements of 31 

U.S.C. § 5318(h) and will update such AML program as necessary to implement 

changes in applicable laws and guidance, 

(b) it (or its agent) will perform the specified requirements of the broker-dealer’s CIP 

and/or the broker-dealer’s beneficial ownership procedures in a manner consistent 

with Section 326 of the USA PATRIOT Act and the Beneficial Ownership Rule, 

respectively,

(c) it will promptly disclose to the broker-dealer potentially suspicious or unusual activity 

detected as part of the CIP and/or beneficial ownership procedures being performed 

on the broker-dealer’s behalf in order to enable the broker-dealer to file a suspicious 

activity report, as appropriate based on the broker-dealer’s judgment,

(d) it will certify annually to the broker-dealer that the representations in the reliance 

agreement remain accurate and that it is in compliance with such representations, and 

(e) it will promptly provide its books and records relating to its performance of CIP 

and/or beneficial ownership procedures to the Commission, to a self-regulatory 

organization that has jurisdiction over the broker-dealer, or to authorized law 

enforcement agencies, either directly or through the broker-dealer, at the request of (i) 

12 As to reasonableness, Division staff stated its understanding that broker-dealers seeking to rely on the no-action 

position in the letter “will undertake appropriate due diligence on the investment adviser that is commensurate with 

the broker-dealer’s assessment of the money laundering risk presented by the investment adviser and the investment 

adviser’s customer base. Such due diligence would be undertaken at the outset of the broker-dealer’s relationship 

with the investment adviser, and updated during the course of the relationship, as appropriate.” The staff stated 

further that a broker-dealer’s assessment of the money laundering risk presented by an investment adviser and its 

customer base should depend on the particular facts and circumstances; that an investment adviser’s status as an 

affiliate is one of many factors that may be relevant to such a risk assessment; and that an affiliated investment 

adviser may or may not present a lower money laundering risk, depending on the facts and circumstances.
Ms. Gonzalez

Assistant Chief Counsel

Division of Trading and Markets

December 6, 2022

Page 5 of 5

Page | 5

the broker-dealer, (ii) the Commission, (iii) a self-regulatory organization that has 

jurisdiction over the broker-dealer, or (iv) an authorized law enforcement agency.

As indicated above, we believe the interaction between broker-dealers and RIAs is precisely the type 

of relationship intended to be covered by the reliance provisions of the CIP Rule and the Beneficial 

Ownership Rule. Because broker-dealers continue to rely on the no-action relief with respect to such 

reliance, SIFMA respectfully requests that the Division staff extend the no-action position stated in 

the 2020 No-Action Letter, subject to the conditions stated in that letter, prior to its expiration on 

December 9, 2022.

* * *

We thank you for the opportunity to submit this no-action request and would be pleased to discuss 

any of these matters further.

Respectfully submitted,

Bernard V. Canepa

Bernard V. Canepa

Managing Director and Associate General Counsel

cc: Emily Westerberg Russell, Chief Counsel, Division of Trading and Markets, SEC

John Fahey, Deputy Chief Counsel, Division of Trading and Markets, SEC

Kelly Shoop, Branch Chief, Division of Trading and Markets, SEC

Katherine Lesker, Special Counsel, Division of Trading and Markets, SEC

Anand Das, Special Counsel, Division of Trading and Markets, SEC

Himamauli Das, Acting Director, FinCEN

Jimmy Kirby, Acting Deputy Director, FinCEN