INTRODUCTION

On February 11, 2014, the Office of the Chief Counsel ("Chief Counsel") of the SEC's Division of Investment Management issued No-Action Relief to The Brink's Company ("Brink's"), a company that provides gold bullion and other precious metals ("Precious Metals") vault services to a wide range of institutional customers.

The No-Action Letter, which is available here, is likely to be of interest to any registered investment company (a "Fund") that now or in the future invests in Precious Metals.

AN OVERVIEW OF THE NO-ACTION RELIEF

The relief permits Brink's to provide vault services to a registered investment company (a "Fund"), notwithstanding the fact that Brink's is not a bank, a member of a national securities exchange or one of the other types of qualified custodians under Section 17(f) of the Investment Company Act of 1940 (the "1940 Act") and the rules thereunder. As background, that statutory provision and the related rules govern the safekeeping of Fund assets and is frequently referred to as the "custody requirement" of the 1940 Act, since it requires a Fund to place and maintain its assets with a qualified custodian.

CONDITIONS UPON WHICH THE RELIEF WAS GRANTED

Chief Counsel conditioned the relief, in part, on the prominent role of Brink's in the regulated Precious Metals derivatives markets in both the United States and the United Kingdom. Specifically, Chief Counsel noted that Brink's is subject to regulatory oversight:

  1. In the United States, as a "Licensed Depository" for Precious Metals supporting transactions that occur over the New York Mercantile Exchange and the Commodity and Metals Exchanges ("NYMEX" and "COMEX," respectively); and
  2. In the United Kingdom, as a member of the London Bullion Market Association ("LBMA").

In both cases, Chief Counsel credited these oversight programs as helping to ensure that Brink's maintains "state-of-the-art secure" vault facilities for Precious Metals. In addition, Chief Counsel noted that as a reporting company under the Securities and Exchange Act of 1934, Brink's is subject to a wide range disclosure obligations about its business activities and related risks. Finally, Chief Counsel commented on the level of insurance coverage carried by Brink's and, more generally, observed that Brink's vaults provide reasonable protections again misappropriation of the Precious Metals kept in them.