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News October 25, 2004 Issue

SEC Staff May Issue Guidance on Timing of Initial Personal Holdings Report

Want to use December 31 as the anniversary date for your access personsí annual personal trading holdings reports? Wondering how they are going to turn those reports around in a week, so as to comply with the January 7 compliance date for the new code of ethics rule? (In the adopting release, the SEC said that by January 7, "each adviser must have an initial holdings report from each access person.")

Help may be on the way. IM Insight has learned that the Division of Investment Management staff has been made aware of the logistical issue. At press time, the staff was awaiting a written inquiry specifically raising the question.

Hopefully, the staff will issue guidance taking the position that as long as an adviser has other aspects of its personal trading code of ethics up and running by January 7, it can collect initial holding reports based on an "as of December 31" date by February 15 or thereabouts. That would give access persons the standard 45 days to get their statements and prepare their holding reports (or submit the statements, if comprehensive, in lieu of such reports).

"We are getting lots of questions on this," said Mari-Anne Pisarri of Pickard and Djinis LLP.

The logistical problem stems from the fact that investors typically donít receive their December 31 statements until mid-to-late January. While advisers could meet the January 7 deadline by using an as-of September 30 date, that would require initial holdings reports to be submitted by mid-November (remember, the information on the holdings report has to be fresh within 45 days).