In an August letter to Mary Podesta, Acting General Counsel of the Investment Company Institute, SEC Associate Director Robert Plaze reminded fund companies that a federal law, the Gramm-Leach-Bliley Act, forbids using investor information gathered under rule 22c-2 for marketing unless the consumers have been given notice and the opportunity to opt out of having their information shared.
Under rule 22c-2. funds are mandated to work out agreements with their financial intermediaries – including those holding shares through omnibus accounts – under which the intermediaries must agree to provide funds with certain shareholder identity and transaction information upon request (See Retirement Plan Intermediaries Nearly Geared up for 22c-2 ).
Plaze said his letter was prompted by a May 2007 Wall Street Journal article quoting PricewaterhouseCoopers as asserting that the new rule might give fund companies “a treasure trove of data they can mine to market directly to customers.”
The SEC officials said the commission believes that 22c-2 information disclosures may be allowed under certain privacy exceptions including processing and servicing transactions at the consumer’s request and complying with applicable legal requirements.
Plaze asserted that privacy rules permit information sharing under the exceptions if financial institutions include in their privacy notices a statement that they make disclosures to “other nonaffiliated third parties as permitted by law’.”‘
“As a matter of routine practice, most financial institutions currently include this statement in their privacy notices,” Plaze wrote.
The SEC letter is here .