The SEC has extended the compliance date for Regulation S-AM from January 1, 2010 to August 1, 2010.  Regulation S-AM, which is a new rule that was adopted by the SEC on August 9, 2009, limits the use by certain “persons” of information received from an affiliate to solicit a consumer for marketing purposes unless the consumer has been given notice and a reasonable opportunity and a reasonable and simple method to opt out of such solicitations.

The “persons” subject to Regulation S-AM are investment advisers registered with the SEC and transfer agents registered with the SEC, as well as brokers, dealers, and investment companies.

Regulation S-AM will allow a consumer, in certain limited situations, to block affiliates of a person subject to Regulation S-AM that the consumer does business with from soliciting the consumer based on certain “eligibility information” received from the person.  “Eligibility information” includes, among other things, certain financial information, such as information regarding the consumer’s transactions or experiences with the person.

It is noted that unlike Regulation S-P, which is the SEC’s rule on the privacy of consumer information, Regulation S-AM does not prohibit the sharing of information with another entity.  Instead, Regulation S-AM prohibits a company from using eligibility information received from an affiliate to make marketing solicitations to consumers, unless:

1. the potential marketing use of the information has been clearly, conspicuously, and concisely disclosed to the consumer;
2. the consumer has been provided a reasonable opportunity and a simple method to opt out of receiving the marketing solicitation; and
3. the consumer has not opted out.

Although substantively different from Regulation S-P, the notice and opt out requirements under Regulation S-AM may be combined with the initial and annual privacy notices as required by Regulation S-P.

Given the new compliance date of August 1, 2010, persons subject to Regulation S-AM such as SEC-registered investment advisers, should plan and adjust their implementation process accordingly.