The Office proposes to amend rule 69W-600.0131 to add new prohibited business practices for investment advisers and associated persons: 1) violations of SEC Rule 204-1 (to be incorporated in 69W-200.002) which requires, among other things, ...

 

DEPARTMENT OF FINANCIAL SERVICES

Securities

RULE NO.:RULE TITLE:

69W-600.0131Prohibited Business Practices for Investment Advisers and Their Associated Persons

PURPOSE AND EFFECT: The Office proposes to amend Rule 69W-600.0131 to add new prohibited business practices for investment advisers and associated persons: 1) violations of SEC Rule 204-1 (to be incorporated in 69W-200.002) which requires, among other things, investment advisers to annually update their registration form; 2) failure to concurrently send clients invoices for investment advisers who directly deduct fees from client accounts; and 3) failure to establish, maintain, and enforce written policies and procedures for compliance with Chapters 517, F.S., and 69W, F.A.C. Amendments also clarify the statutory implementation of the rule and the applicability of federal standards incorporated by reference. SEC Rule 206(4)-4 is also stricken from subsection (1)(a) as it no longer contains substantive language.

SUMMARY: The amendments to Rule 69W-600.0131 establish 3 new prohibited business practices for investment advisers and associated persons, clarify the statutory implementation and applicability of the rule, and strikes an outdated material incorporated by reference.

SUMMARY OF STATEMENT OF ESTIMATED REGULATORY COSTS AND LEGISLATIVE RATIFICATION: The Agency has determined that this will not have an adverse impact on small business or likely increase directly or indirectly regulatory costs in excess of $200,000 in the aggregate within one year after the implementation of the rule. A SERC has not been prepared by the Agency.

The Agency has determined that the proposed rule is not expected to require legislative ratification based on the statement of estimated regulatory costs or if no SERC is required, the information expressly relied upon and described herein: The Agency expressly relies on an analysis of potential economic impact conducted by persons with subject matter knowledge of this rule.

Any person who wishes to provide information regarding a statement of estimated regulatory costs, or provide a proposal for a lower cost regulatory alternative must do so in writing within 21 days of this notice.

RULEMAKING AUTHORITY: 517.03(1), 517.1215 FS.

LAW IMPLEMENTED: 517.12(4), 517.1215, 517.161(1) FS.

IF REQUESTED WITHIN 21 DAYS OF THE DATE OF THIS NOTICE, A HEARING WILL BE SCHEDULED AND ANNOUNCED IN THE FAR.

THE PERSON TO BE CONTACTED REGARDING THE PROPOSED RULE IS: John Kim, [e-mail], [phone]

 

THE FULL TEXT OF THE PROPOSED RULE IS:

 

69W-600.0131 Prohibited Business Practices for Investment Advisers and Their Associated Persons.

(1) The following are prohibited business practices for investment advisers and associated persons pursuant to Section 517.1215(2), F.S., and are deemed demonstrations of unworthiness by an investment adviser or an associated person of an investment adviser under Section 517.161(1)(h), F.S., without limiting that term to the practices specified herein:

(a) With respect to any customer, transaction or business in, to or from this state, engaging in any conduct prohibited by, or failing to comply with the requirements of, the following, notwithstanding the fact that the investment adviser or associated person is not registered or required to be registered under the Investment Advisers Act of 1940:

Sections 204, 204A, 205, 206, 207, 208 of the Investment Advisers Act of 1940, (15 U.S.C.A. §§ 80b-4, 80b-4a, 80b-5, 80b-6, 80b-7, 80b-8), or SEC Rules 204-1, 204-3, 205-1, 205-2, 205-3, 206(3)-1, 206(3)-2, 206(4)-1, 206(4)-3 and  206(4)-4, (17 C.F.R. §§ 275.204-1, 275.204-3, 275.205-1, 275.205-2, 275.205-3, 275.206(3)-1, 275.206(3)-2, 275.206(4)-1, 275.206(4)-3 and  275.206(4)-4), which are incorporated by reference in Rule 69W-200.002, F.A.C.

(b) through (u) No change.

(v) Failing to send a customer an itemized invoice or statement each time a fee is directly deducted from the customer’s account in accordance with the provisions of Rule 69W-600.0132(2)(i), F.A.C.

(w) Failing to establish, maintain, and enforce written policies and procedures reasonably designed to achieve compliance, by the investment adviser or its associated persons, with Chapters 517, F.S. and 69W, F.A.C.

(2) No change.

Rulemaking Authority 517.03(1), 517.1215 FS. Law Implemented 517.12(4), 517.1215, 517.161(1) FS. History–New 1-25-00, Amended 10-30-03, Formerly 3E-600.0131, Amended 10-23-06, 1-18-09, 11-22-10, 9-22-14,           .

 

NAME OF PERSON ORIGINATING PROPOSED RULE: Pamela Epting, Director, Division of Securities

NAME OF AGENCY HEAD WHO APPROVED THE PROPOSED RULE: Financial Services Commission

DATE PROPOSED RULE APPROVED BY AGENCY HEAD: January 13, 2015

DATE NOTICE OF PROPOSED RULE DEVELOPMENT PUBLISHED IN FAR: November 24, 2014