Investment Adviser Act of 1940 - Rule 206(4)-3
Thomas Weisel Partners LLC

September 24, 2004

We would not recommend enforcement action to the Commission under Section 206(4) of the Investment Advisers Act of 1940 ("Advisers Act") and Rule 206(4)-3 thereunder if any investment adviser that is required to be registered pursuant to Section 203 of the Advisers Act pays to Thomas Weisel Partners LLC (the "Settling Firm"), a registered broker-dealer and investment adviser, or any of the Settling Firm's associated persons, as defined in Section 202(a)(17) of the Advisers Act, a cash fee, directly or indirectly, for the solicitation of advisory clients in accordance with Rule 206(4)-3,¹ notwithstanding a judgment of injunction from the United States District Court for the Southern District of New York (the "Final Judgment")² and any Related State Judgment³ that otherwise would preclude such an investment adviser from paying the Settling Firm a solicitation fee.

Our position is based on the facts and representations in your letter dated September 24, 2004, particularly the Settling Firm's representations that:

1. it will conduct any cash solicitation arrangement entered into with any investment adviser required to be registered under Section 203 of the Advisers Act in compliance with the terms of Rule 206(4)-3 except for the investment adviser's payment of cash solicitation fees to the Settling Firm, which is subject to the Final Judgment and any Related State Judgment;
    
2. the Final Judgment does not bar or suspend the Settling Firm or any person currently associated with the Settling Firm from acting in any capacity under the federal securities laws;⁴
    
3. it will comply with the terms of the Final Judgment and any Related State Judgment, including, but not limited to, the payment of disgorgement, pre-judgment interest, civil or administrative penalties and fines; and
    
4. for ten years from the date of the entry of the Final Judgment, the Settling Firm or any investment adviser with which it has a solicitation arrangement subject to Rule 206(4)-3 will disclose the Final Judgment and any Related State Judgment in a written document that is delivered to each person whom the Settling Firm solicits (a) not less than 48 hours before the person enters into a written or oral investment advisory contract with the investment adviser or (b) at the time the person enters into such a contract, if the person has the right to terminate such contract without penalty within 5 business days after entering into the contract.
    

This position applies only to the disqualification under Rule 206(4)-3 resulting from the Final Judgment and any Related State Judgment and not to any other basis for disqualification under Rule 206(4)-3 that may exist or arise with respect to the Settling Firm or any of its associated persons.

Stephan N. Packs
Senior Counsel

Endnotes

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¹ Rule 206(4)-3 prohibits any investment adviser that is required to be registered under the Advisers Act from paying a cash fee, directly or indirectly, to any solicitor with respect to solicitation activities if, among other things, the solicitor is subject to an order, judgment or decree that is described in Section 203(e)(4) of the Advisers Act.

² Securities and Exchange Commission v. Thomas Weisel Partners LLC, 04 Civ 06910 (WHP) (S.D.N.Y. September 24, 2004).

³ "Related State Judgment" means any injunction by decree, order, or judgment of any court of competent jurisdiction entered in connection with a settlement agreement by the Settling Firm with a state or territorial agency, the New York Stock Exchange, Inc. or the NASD, Inc. that generally relates to the same facts and is based on the same conduct as alleged in the complaint underlying the Final Judgment.

⁴ The Investment Company Act of 1940 (the "Company Act") makes it unlawful for a person to serve or act in the capacity of employee, officer, director, member of an advisory board, investment adviser, or depositor of any registered investment company or business development company, as defined in Section 2(a)(48) of the Company Act ("BDC"), or principal underwriter for any registered open-end company, registered unit investment trust, registered face amount certificate company or BDC ("Prohibited Capacities") if, among other things, that person, by reason of any misconduct, is permanently or temporarily enjoined from acting as an underwriter, broker, dealer or investment adviser, or from engaging in or continuing any conduct or practice in connection with any such activity, or in connection with the purchase or sale of any security. See Section 9(a) of the Company Act and Section 59 of the Company Act (making the provisions of Section 9(a) applicable to a BDC to the same extent as if it were a registered closed-end investment company).

The entry of the Final Judgment and any Related State Judgment, absent the issuance of an order by the Commission pursuant to Section 9(c) of the Company Act that exempts the Settling Firm from the provisions of Section 9(a) of the Company Act, would effectively prohibit the Settling Firm and its associated persons from serving or acting in any of the Prohibited Capacities. You state that, as of the date of your letter, neither the Settling Firm nor any of its associated persons serves or acts in any of the Prohibited Capacities, and that the Settling Firm and its associated persons will not act or serve in any of the Prohibited Capacities unless and until the Commission issues an order pursuant to Section 9(c) of the Company Act that exempts the Settling Firm from the provisions of Section 9(a) of the Company Act operative as a result of the Final Judgment and any Related State Judgment.

Incoming Letter

The Incoming Letter is in Acrobat format.

http://www.sec.gov/divisions/investment/noaction/twp092404.htm