WASHINGTON (HedgeWorld.com)–The Securities and Exchange Commission’s division of investment management has provided a “no-action letter” to Credit Suisse First Boston LLC, allowing CSFB to use certain “global consent forms” to provide statutorily required written disclosures to investment advisory clients regarding certain derivatives transactions.
A global consent form would economize, removing the need to obtain transaction-by-transaction consents for the program in question–a client would consent in advance to the CSFB’s, or its derivative affiliate’s, actions as principals for as much as a year at a time (or shorter periods as agreed upon).
The need for a no-action letter arose because section 206(3) of the Investment Advisers Act makes it unlawful for any adviser, acting as a principal for its own account, to sell any security to, or buy any security from, a client without disclosure and consent in writing–a rule designed to address the potential for self-dealing when the same firm is both counterparty and adviser to the same client.
The CSFB wants to employ a global consent system for a volatility management program for high-net-worth individuals, in which a participating client must have a net worth of at least US$20 million excluding assets committed to the program. The program uses covered call options, either to provide yield enhancement of a client’s underlying stock positions, or to enable the client to exit an underlying stock position at a specified price target.