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Goldberg and Greer on the SECs Adoption of Regulation S-AM


Regulation S-AM is designed to prevent registered investment advisers, investment companies, broker-dealers and registered transfer agents ("Covered Persons") from using certain consumer information provided by a Covered Persons affiliate to market products or services, unless there is full disclosure to the consumer and the consumer does not "opt out" of such marketing. In this Analysis, Alan P. Goldberg and Mark R. Greer discuss Regulation S-AM’s provisions. They write:
 
     The Securities and Exchange Commission (the "Commission") on August 4, 2009 adopted Regulation S-AM, which addresses affiliate marketing through the use of consumer information. Regulation S-AM is designed to prevent registered investment advisers, investment companies, broker-dealers and registered transfer agents ("Covered Persons") from using certain consumer information provided by a Covered Persons affiliate to market products or services, unless there is full disclosure to the consumer and the consumer does not "opt out" of such marketing. Compliance with Regulation S-AM is required by January 1, 2010.
 
     The Regulation's Provisions. In general, Regulation S-AM contains two key provisions: notice to consumers and an opt-out provision. Covered Persons may not use "eligibility information" (defined below) about a consumer obtained from relationships with affiliates to solicit the consumer, unless:
  • the consumer receives a clearly, conspicuously and concisely disclosed notice that the Covered Person may use such eligibility information;
  • the consumer is provided a reasonable method and opportunity to "opt out" of the use of such information for marketing purposes; and
  • the consumer does not opt out.
     . . . .
 
     Exemptions. Regulation S-AM provides for several exemptions from the notice and opt-out requirements, including:
  • Covered Persons responding to consumer-initiated communications about products or services;
  • Covered Persons responding to authorizations by the consumer to receive solicitations;