Affiliated Securities Lending Agent Okay, Says IM Staff
The Division of Investment Management has expanded the scope of its 2001 no-action letter to Chase Manhattan Bank. The relief provided in that letter codified a line of exemptive orders dealing with issues raised under ICA Section 17(d) when joint accounts are used to collectively invest cash collateral received by funds that participate in a securities lending program. The relief, however, did not apply to situations where an affiliated person of a fund served as the securities lending agent.
Last month, the staff broadened the scope of the Chase letter to encompass situations where the securities lending agent is affiliated with the fund. In a short December 14 letter issued to the Investment Company Institute, the IM staff stated that "cash collateral from a securities lending program with an affiliated lending agent may be included in a Joint Account [as defined in the Chase letter], provided that all of the representations set forth in the Chase Letter are satisfied."
The staff asked the ICI to pass the guidance along to its members.