Rule 17d-1 No Action Letter Released

Aggregation of Orders Addressed

By John M. Baker, Esq.

The SEC‘s Division of Investment Management recently issued a letter clarifying its position on the application of Rule 17d-1 to aggregated transactions in private placement securities. Massachusetts Mutual Life Insurance Co., SEC No-Action Letter (July 28, 2000).

As described below, the original MassMutual letter stated flatly that when the purchase or sale of private placement securities involves the negotiation of any of the terms of the securities by an investment adviser, the aggregation of the orders of an investment company with its affiliates for these securities generally would involve the requisite element of combination or profit motive for Section 17(d) and Rule 17d-1 to apply.

Now the staff has indicated that this strict position may not necessarily apply if the adviser does not participate or have a material pecuniary interest in an entity that participates in the transaction.

The text of the clarification reads in full:

>>On June 7, 2000, we issued a no-action letter to Massachusetts Mutual Life Insurance Company (“MassMutual”) under Section 17(d) of the Investment Company Act of 1940 and Rule 17d-1 thereunder with respect to MassMutual’s proposed aggregation of orders, on behalf of its proprietary account and registered investment companies (“funds”) and certain private accounts for which it serves as investment adviser, for the purchase and sale of private placement securities for which it negotiates no term other than price. Since the issuance of the letter, we have received a number of inquiries regarding the scope of the no-action relief granted to MassMutual. We are writing to clarify that MassMutual did not request no-action relief, and we did not express our views, with respect to aggregated transactions in which a fund’s investment adviser: (1) does not participate or have a material pecuniary interest in an entity that does participate; but (2) negotiates the terms of the private placement securities on behalf of the fund and other participants in the aggregated transaction which are affiliated with the fund. If we are requested to do so, we will address this issue separately.


Copyright 2000, John M. Baker, Esq., Stradley, Ronon, Stevens & Young, LLP, 1220 19th Street, N.W., Suite 700, Washington, DC 20036 – (202) 822-9611- Fax (202) 822-0140 This article was originally posted to the FundLaw List, To subscribe to FundLaw, send a blank e-mail to

Nothing herein is intended as legal or financial advice. The law is different in different jurisdictions, and the facts of a particular matter can change the application of the law. Please consult an attorney or your financial advisor before acting upon the information contained in this article.

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