Privacy Act of 1974: Notice of Modifications to a System of Records and Establishment of a New System of Records

SECURITIES AND EXCHANGE COMMISSION

[Release No. PA-31; File No. S7-02-01]

Privacy Act of 1974: Notice of Modifications to a System of Records and Establishment of a New System of Records.

Agency: Securities and Exchange Commission.

Action: Notice of intended modifications to an existing system of records and the establishment of a new system of records.

Summary: the Securities and Exchange Commission (SEC or the Commission) proposes to modify an existing system of records by excluding investment adviser registration forms, forms withdrawing registration by investment advisers, and related investment adviser records. the Commission further proposes to add a new system of records consisting of these registration forms, withdrawal notices, and related records. This proposal is precipitated by the development of a new Internet-based system for the registration of investment advisers called the Investment Adviser Registration Depository (IARD). NASD Regulation, Inc. (NASDR) will operate the IARD.

Dates: Comments must be received by [30 days after publication in the Federal Register]. the proposed changes and the new system of records will take effect [40 days after publication in the Federal Register] unless the Commission receives comments that would require a different determination.

Addresses: Please send three copies of your comments to Jonathan G. Katz, Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. You may also send your comments electronically to the following electronic address: rule-comments@sec.gov. All comments should refer to File No. S7-02-01 and, if sent electronically, should include this file number on the subject line. Comment letters will be available for public inspection and copying at our Public Reference Room, 450 Fifth Street, NW, Washington, DC 20549. If sent electronically, comment letters will also be available on our Web site http://www.sec.gov).

For Further Information Contact: Elizabeth T. Tsai, Privacy Act Staff Attorney (202) 942-4326, Office of Filings and Information Services, SEC, Operations Center, 6432 General Green Way, Alexandria, VA 22312-2413.

Supplementary Information: the Commission gives notice of major changes to "Applications for Registration or Exemption under the Investment Advisers Act of 1940 and the Investment Company Act of 1940" (SEC-2), which results in the establishment of a new system – "Investment Adviser Records " (SEC-50).

SEC-2

Currently, the Commission treats paper and microfiche copies of applications for registration by investment advisers (Form ADV) and their related amendments and withdrawal notices as agency records subject to the Privacy Act. Accordingly, the Commission has published and periodically updated a system of records notice for these records, designated as SEC-2. These records contain names of individuals and information about those individuals, such as disciplinary information. However, the current Privacy Act notice does not address the electronic filing of such forms and new ways of maintaining and retrieving them through any SEC or non-SEC system. the Commission is therefore proposing to transfer investment adviser records, whether in paper, microfiche, or electronic format from SEC-2 to "Investment Adviser Records" (SEC-50), a new Privacy Act records system.

SEC-50

On September 12, 2000, the Commission adopted amendments to rules 30-5 and 30-11 of the SEC's Organization and Program Management rules [17 CFR 200.30-5 and 200.30-11], new rule 203-3 and Form ADV-H; adopted amendments to rules 0-2, 0-7, 203-1, 203-2, 203A-1, 203A-2, and 204-1 [17 CFR 275.0-2, 275.0-7, 275.203-1, 275.203-2, 275.203A-1, 275.203A-2, and 275.204-1]; and Form ADV, Form ADV-W, and Form 4-R [17 CFR 279.1, 279.2, and 279.4] under the Investment Advisers Act of 1940 [15 U.S.C. 80b-1] (the Advisers Act or the Act). the Commission also withdrew rule 204-5 [17 CFR 275.204-5] and Forms 5-R, 6-R, 7-R, and ADV-Y2K [17 CFR 279.5, 279.6, 279.7, and 279.9] under the Advisers Act.

These amendments require investment advisers to submit all Form ADV applications for registration, Form ADV amendments, and Form ADV-W withdrawal requests electronically through the IARD. As a result of these amendments, NASDR, which is responsible for the operation and maintenance of the IARD system, effectively will be the custodian of investment adviser registration records filed electronically through the IARD after January 1, 2001. Under 5 U.S.C. 552a(m), the SEC and the NASDR intend to enter into a Memorandum of Understanding, under which the NASDR will assume, among other things, responsibilities for compliance with the Privacy Act with respect to those records and further will maintain those records in accordance with federal recordkeeping requirements.

All investment adviser records on paper and microfiche, received by the SEC before January 1, 2001, will remain in its custody and control and their routine uses are unchanged by the development of the IARD. All investment adviser records received by the SEC after January 1, 2001 that are on paper or microfiche also will be in the SEC's custody and control.

As 5 U.S.C. 552a(r) requires, the SEC has submitted its reports of the new and the altered systems of records to the Congress and the Office of Management and Budget. This complies with Appendix I to OMB Circular A-130, "Federal Agency Responsibilities for Maintaining Records About Individuals," as amended on February 20, 1996. Accordingly, the SEC proposes to amend SEC-2 and establish SEC-50, to read as follows:

SEC-2

System Name: Applications for Registration or Exemption under the Investment Company Act of 1940.

System Location: SEC, 450 Fifth Street, NW, Washington, DC 20549.

Categories of Individuals Covered by the System: Officers, directors, and other individuals related to investment companies.

Categories of Records in the System: Name, date of birth, address, telephone numbers, social security number, education, past and present employment, disciplinary history, business relationships, and similar information.

Authority for Maintenance of the System: 15 U.S.C. 77f, 77g, 77h, 77j, 80a-6, and 80a-8.

Purpose: To help the SEC staff process applications for registration or exemption, registration statements, and related forms under the Investment Company Act of 1940 and implement the Federal securities laws and rules.

Routine Uses of Records Maintained in the System, Including Categories of Users and the Purposes of Such Uses: in addition to the conditions of disclosure under 5 U.S.C. 552a(b), the SEC staff may provide these records to:

(1) Any member of the general public upon request;

(2) Any Federal, state, local, or foreign government authority or securities self-regulatory organization that is investigating a violation or potential violation of a statute, rule, regulation, or order;

(3) Any Federal, state, local, or foreign bar association or similar licensing authority responsible for possible disciplinary action;

(4) Any Federal, state, or local government or governmental authority that is deciding to hire or retain an individual, sign a contract, or issue a license, grant, or benefit;

(5) Any individual or entity appointed by a court of competent jurisdiction or agreed upon by the parties to a pending court action or administrative proceeding alleging a violation of the Federal securities laws or rules; and

(6) Any contractor that performs, on the SEC's behalf, services requiring the use of these records.

Policies and Practices for Storing, Retrieving, Accessing, Retaining, and Disposing of Records in the System:

Storage: These records are maintained on paper, microfilm, or magnetic tape and in a computer system.

Retrievability: These records are retrievable by the name of, or a file number assigned to, the registrant. Individual name access to these records is available through the SEC's Name-Relationship Search Index.

Safeguards: Non-computer records are maintained in a central records facility that only authorized individuals may access. the facility is locked, with security cameras and a 24-hour security guard. Computer records, which are subject to data integrity controls, require passcodes for database access.

Retention and Disposal: These records are transferred to the Federal Records Center periodically for storage. They are controlled by file number and retained under 17 CFR 200.80f.

System Manager and Address: Records Officer, SEC, Operations Center, 6432 General Green Way, Alexandria, VA 22312-2413.

Notification Procedure: Requests to determine whether this system of records contains a record pertaining to the requesting individual should be sent to the Privacy Act Officer, SEC Operations Center, 6432 General Green Way, Alexandria, VA 22312-2413.

Records Access Procedures: Persons wishing to access or contest these records should contact the Privacy Act Officer, SEC Operations Center, 6432 General Green Way, Alexandria, VA 22312-2413.

Contesting Record Procedures: See Records Access Procedures, above.

Record Source Categories: Applications for registration or exemption and related forms filed with the SEC under the Investment Company Act of 1940.

Exemptions Claimed for the System: None.

SEC-50

System Name: Investment Adviser Records.

System Location:

Records filed before January 1, 2001 and paper records filed after January 1, 2001: SEC, 450 Fifth Street, NW, Washington, DC 20549; and

Form ADV applications for registration, Form ADV Amendments, and Form ADV-W withdrawal notices filed electronically on IARD after January 1, 2001: NASDR, 9509 Key West Avenue, Rockville, MD 20850.

Categories of Individuals Covered by the System: Registrants and officers, directors, principal shareholders, or other individuals related to them.

Categories of Records in the System: Name, address, telephone number, social security number, education, past and present employment, disciplinary history, business relationships, and similar information.

Authority for Maintenance of the System: 15 U.S.C. 80b-3 and 80b-6a.

Purpose: To help the SEC staff process applications for registration or exemption and related forms under the Investment Advisers Act of 1940 and implement the Federal securities laws and rules.

Routine Uses of Records Maintained in the System, Including Categories of Users and the Purposes of Such Uses: in addition to the conditions of disclosure under 5 U.S.C. 552a(b), the SEC staff may provide these records to:

(1) Any member of the general public upon request;

(2) Any Federal, state, local, or foreign government authority or securities or commodities self-regulatory organization that is investigating a violation or potential violation of a statute, rule, regulation, or order;

(3) Any Federal, state, local, or foreign bar association or similar licensing authority responsible for possible disciplinary action;

(4) Any Federal, state, or local government or governmental authority that is deciding to hire or retain an individual, sign a contract, or issue a license, grant, or benefit;

(5) Any individual or entity appointed by a court of competent jurisdiction or agreed upon by the parties to a pending court action or administrative proceeding alleging a violation of the Federal securities laws or rules; and

(6) Any contractor that performs, on the SEC's behalf, services requiring the use of these records.

Policies and Practices for Storing, Retrieving, Accessing, Retaining, and Disposing of Records in the System:

Storage:

Records filed before January 1, 2001 and paper records filed after January 1, 2001 in the SEC's custody are maintained on paper, microfilm, or magnetic tape and in a computer system.

Form ADV applications for registration, Form ADV amendments and Form ADV-W notices of withdrawal filed electronically on the IARD after January 1, 2001 in the NASDR's custody are maintained in electronic format (IARD).

Retrievability: These records are retrievable by the name of, or a file number assigned to, the registrant. Individual name access to these records is available through the SEC's Name-Relationship Search Index.

Safeguards: Non-computer records in the SEC's custody are maintained in a central records facility that only authorized individuals may access. the facility is locked, with security cameras and a 24-hour security guard. Computer records, which are subject to data integrity controls, require passcodes for database access.

Retention and Disposal: the records in the SEC's custody are transferred to the Federal Records Center periodically for storage. They are controlled by file number and retained under 17 CFR 200.80f.

System Managers and Addresses:

Records filed before January 1, 2001 and paper records filed after January 1, 2001 - Records Officer, SEC Operations Center, 6432 General Green Way, Alexandria, VA 22312-2413.

Form ADV applications for registration, Form ADV amendments and Form ADV-W notices of withdrawal filed electronically on IARD after January 1, 2001 - NASDR, 9509 Key West Avenue, Rockville, MD 20850.

Notification Procedure: Requests to determine whether this system of records contains a record pertaining to the requesting individual should be sent to the Privacy Act Officer, SEC Operations Center, 6432 General Green Way, Alexandria, VA 22312-2413.

Records Access Procedures: Persons wishing to access or contest these records should contact the Privacy Act Officer, SEC Operations Center, 6432 General Green Way, Alexandria, VA 22312-2413.

Contesting Record Procedures: See Records Access Procedures, above.

Record Source Categories: Registrations and related forms filed with the SEC under the Investment Advisers Act of 1940.

Exemptions Claimed for the System: None.

By the Commission.

Jonathan G. Katz
Secretary

January 19, 2001