April 9, 2001

The Division of Investment Management issued a letter to the Investment Company Institute (ICI) that provides guidance on how Regulation S-P applies to investment companies and investment advisers. Regulation S-P is the rule that will require investment companies, investment advisers and other financial organizations by July 1, 2000, to adopt privacy policies and to send privacy notices to their clients.

Some of the more notable positions taken by the SEC staff in the letter are as follows:

• Regulation S-P does not apply to hedge funds or other entities excluded from the definition of investment company by Section 3(c)(1) or Section 3(c)(7);
• Wrap account clients, for purposes of Regulation S-P, are "customers" of the advisers used by the sponsors of wrap account programs;
• A shareholder of a fund who purchased fund shares through a broker-dealer is a "customer" of that fund, unless the broker-dealer is the record holder of the shares for the benefit of the person;
• Privacy notices may accompany other documents, provided the notices are clear and conspicuous; and
• A mutual fund complex or other multiple company financial institution does not have to separately name each subsidiary or other affiliated company to which the privacy notice applies.