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News October 31, 2005 Issue

Fee-Based Guidance Starting to Flow

The Division of Investment Management staff has issued its first interpretative letter under the fee-based brokerage rule, and more guidance is on the way.

In a September 29 letter issued to UBS Financial Services, the staff confirmed that investment discretion granted by a brokerage customer for purposes of a UBS cash management program constitutes "temporary or limited" discretion under the fee-based brokerage rule, provided certain conditions were met. As a result, customer accounts in the program will continue to be treated as brokerage accounts and will not have to be converted to advisory accounts.

The staff also is poised to respond to a number of interpretative questions raised by the Securities Industry Association. "I would expect that letter to be issued very shortly," said IM associate director Robert Plaze at last week’s NSCP conference.