The use of a designation or a certification by associated persons or investment advisers confers an impression with senior citizens or retirees that the associated person or investment adviser has special qualifications or specialized education in ...

DEPARTMENT OF FINANCIAL SERVICES
Securities

RULE NO: RULE TITLE
69W-600.013: Prohibited Business Practices for Dealers and Their Associated Persons
69W-600.0131: Prohibited Business Practices for Investment Advisers and Their Associated Persons
69W-600.0133: Use of Senior-Specific Certifications and Professional Designations by Associated Persons and Investment Advisers
PURPOSE AND EFFECT: The use of a designation or a certification by associated persons or investment advisers confers an impression with senior citizens or retirees that the associated person or investment adviser has special qualifications or specialized education in particular areas of finance, financial planning, estate planning, or investing. The requirements to obtain designations and certifications vary greatly, as can the processes for monitoring compliance with a code of conduct or ethics, if any, adopted by the organization which awards the designation or certification. Investors often have insufficient information about the designation or certification when trying to determine which designation or certification represents meaningful educational achievement by the salesperson, or which designation or certification merely represents a marketing tool. This problem has been particularly pronounced in the area of so-called “senior designations.” Certain segments of the financial services industry have aggressively used designations and certifications that incorrectly imply expertise in the financial needs of seniors. Such aggressive use often results in unsuitable investments being sold to unsuspecting seniors by apparent “experts” who are little more than salespersons with little or no expertise in the individual, specific needs of the senior client or understanding of the product that they are selling. To address this issue, the National Association of Securities Administrators (NASAA) formed a task force to study this issue and develop a model rule for state regulators. The proposed rules adopt the model rule recommended by NASAA.
SUMMARY: The proposed rules prohibit the misleading use by any person of senior and retiree designations while also providing a means by which the Office may recognize the use of certain designations which have been accredited. Rule 69W-600.0133, F.A.C., is being proposed to prohibit the use of a senior specific certification or designation in connection with the offer, sale or purchase of securities or the provision of advice as the advisability of investing in, purchasing or selling securities, either directly or indirectly or through publications or writings, or by issuing or promulgating analyses or reports relating to securities, that indicates or implies that the user has special certification or training in advising or servicing senior citizens or retirees, in such a way as to mislead any person shall be a dishonest and unethical practice in the securities business in violation of Section 517.161(1)(d) or 517.161(1)(h), Florida Statutes. The Rule provides examples of misleading designations, including use of certifications unearned, nonexistent or self-conferred titles and use of titles that imply a certification or designation the person does not have. Also included in paragraph (1)(d) of the Rule with this category are use of certifications or designations from an organizations that: 1) is primarily engaged in the business of instruction in sales and /or marketing; 2) does not have reasonable standards or procedures for assuring the competency of its designees or certificants; 3) does not have reasonable standards or procedures for monitoring and disciplining its designees or certificants for improper or unethical conduct; or 4) does not have reasonable continuing education requirements for its designees or certificants in order to maintain the designation or certification. In subsection (2) of the Proposed Rule, a rebuttable presumption is created that organizations accredited by the American National Standards Institute, National Commission for Certifying Agencies or any Organization on the U.S. Department of Education list entitled “Accrediting Agencies Recognized for Title IX Purposes” will not be disqualified under the terms of subparagraphs (1)(d)1. through 4. In determining whether words constitute a certification or professional designation indicating or implying a special expertise in advising or servicing senior citizens, use of the words such as “senior,” “elder,” “retirement,” combined with such words such as “certified,” “registered,” “chartered,” and like words will be considered. See text of Rule for complete index. Job titles within an organization are excluded. This Rule is based on the National Association of Securities Administrators Association (NASAA) Model Rule adopted March 20, 2008. Rule 69W-600.013 and Rule 69W-600.0131, F.A.C., are amended to add conforming amendments that provide that any unethical practice pursuant to Rule 69W-600.0133, F.A.C., shall constitute a demonstration of unworthiness by the dealers and their associated persons per Rule 69W-600.013, F.A.C., and investment advisers and their associated persons per Rule 69W-600.0131, F.A.C.
SUMMARY OF STATEMENT OF ESTIMATED REGULATORY COSTS: No Statement of Estimated Regulatory Cost was prepared.
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.
SPECIFIC AUTHORITY: 517.03(1), 517.1215(2), 517.1217 FS.
LAW IMPLEMENTED: 517.081, 517.12, 517.1215, 517.1217, 517.161 FS.
IF REQUESTED WITHIN 21 DAYS OF THE DATE OF THIS NOTICE, A HEARING WILL BE SCHEDULED AND ANNOUNCED IN FAW.
THE PERSON TO BE CONTACTED REGARDING THE PROPOSED RULE IS: Bill Reilly, Chief, Securities Regulation, Office of Financial Regulation, The Fletcher Building, 200 East Gaines Street, Tallahassee, Florida 32399, [phone], [e-mail].

THE FULL TEXT OF THE PROPOSED RULE IS:

69W-600.013 Prohibited Business Practices for Dealers and Their Associated Persons.

(1) The following are deemed demonstrations of unworthiness by a dealer under Section 517.161(1)(h), F.S., without limiting that term to the practices specified herein:

(a) through (n) No change.

(o) Any unethical practice pursuant to Rule 69W-600.0133, F.A.C.

(2) The following are deemed demonstrations of unworthiness by an associated person of a dealer under Section 517.161(1)(h), F.S., without limiting that term to the practices specified herein:

(a) through (g) No change.

(h) Engaging in any of the practices specified in paragraph (1)(a), (b), (e), (f), (g), (h), (i), (k), (l), (m), or (n) or (o).

(3) No change.

Specific Authority 517.03(1), 517.1217 FS. Law Implemented 517.081, 517.1217, 517.161(1) FS. History–New 12-5-79, Amended 9-20-82, Formerly 3E-600.13, Amended 8-1-91, 6-16-92, 1-11-93, 11-7-93, 5-5-94, 9-9-96, 10-20-97, 1-25-00, 10-30-03, Formerly 3E-600.013, Amended 10-23-06,________.

 

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

(1) The following 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) through (t) No change.

(u) Any unethical practice pursuant to Rule 69W-600.0133, F.A.C.

(2) through (3) No change.

Specific Authority 517.03(1), 517.1215 FS. Law Implemented 517.12(4), 517.1215, 517.161(1) FS. History–New 1-25-00, Amended 410-30-03, Formerly 3E-600.0131, Amended 10-23-06,________.

 

69W-600.0133 Use of Senior-Specific Certifications and Professional Designations by Associated Persons and Investment Advisers.

(1) The use of a senior specific certification or designation by any person in connection with the offer, sale, or purchase of securities, or the provision of advice as to the value of or the advisability of investing in, purchasing, or selling securities, either directly or indirectly or through publications or writings, or by issuing or promulgating analyses or reports relating to securities, that indicates or implies that the user has special certification or training in advising or servicing senior citizens or retirees, in such a way as to mislead any person shall be a dishonest and unethical business practice in the securities industry in violation of Section 517.161(1)(d) or 517.161(1)(h), F.S., by an associated person of a dealer or investment adviser. The prohibited use of such certifications or professional designation includes, but is not limited to, the following:

(a) Use of a certification or professional designation by a person who has not actually earned or is otherwise ineligible to use such certification or designation;

(b) Use of a nonexistent or self-conferred certification or professional designation;

(c) Use of a certification or professional designation that indicates or implies a level of occupational qualifications obtained through education, training, or experience that the person using the certification or professional designation does not have; and

(d) Use of a certification or professional designation that was obtained from a designating or certifying organization that:

1. Is primarily engaged in the business of instruction in sales and/or marketing;

2. Does not have reasonable standards or procedures for assuring the competency of its designees or certificants;

3. Does not have reasonable standards or procedures for monitoring and disciplining its designees or certificants for improper or unethical conduct; or

4. Does not have reasonable continuing education requirements for its designees or certificants in order to maintain the designation or certificate.

(2) There is a rebuttable presumption that a designating or certifying organization is not disqualified solely for purposes of paragraph (1)(d) above when the organization has been accredited by:

(a) The American National Standards Institute; or

(b) The National Commission for Certifying Agencies; or

(c) An organization that is on the United States Department of Education’s list entitled “Accrediting Agencies Recognized for Title IV Purposes” and the designation or credential issued therefrom does not primarily apply to sales and/or marketing.

(3) In determining whether a combination of words (or an acronym standing for a combination of words) constitutes a certification or professional designation indicating or implying that a person has special certification or training in advising or servicing senior citizens or retirees, factors to be considered shall include:

(a) Use of one or more words such as “senior,” “retirement,” “elder,” or like words, combined with one or more words such as “certified,” registered,” “chartered,” “adviser,” “specialist,” “consultant,” “planner,” or like words, in the name of the certification or professional designation; and

(b) The manner in which those words are combined.

(4) For purposes of this rule, a certification or professional designation does not include a job title within an organization that is licensed or registered by a state or federal financial services regulatory agency, when that job title:

(a) Indicates seniority or standing within the organization; or

(b) Specifies an individual’s area of specialization within the organization.

For purposes of this subsection, financial services regulatory agency includes, but is not limited to, an agency that regulates broker-dealers, investment advisers, or investment companies as defined under the Investment Company Act of 1940, 15 U.S.C. s. 80a-1 et seq.

(5) Nothing in this rule shall limit the Office of Financial Regulation’s authority to enforce existing law.

Specific Authority 517.03(1), 517.1215(2), 517.1217 FS. Law Implemented 517.1215(2), 517.1217, 517.161 FS. History–New ________.

NAME OF PERSON ORIGINATING PROPOSED RULE: Bill Reilly, Chief, Securities Regulation, Office of Financial Regulation, The Fletcher Building, 200 East Gaines Street, Tallahassee, Florida 32399, [phone], [e-mail]
NAME OF AGENCY HEAD WHO APPROVED THE PROPOSED RULE: Financial Services Commission
DATE PROPOSED RULE APPROVED BY AGENCY HEAD: September 16, 2008
DATE NOTICE OF PROPOSED RULE DEVELOPMENT PUBLISHED IN FAW: June 20, 2008