The rules are proposed for amendment to: update references to incorporated material; correct cross-references; adopt FINRA 3240 in whole in Rule 69W-600.013 (previously adopted only in part); adopt MSRB Definitional Rules D-13, D-14, G-42, and G-43; ...

 

DEPARTMENT OF FINANCIAL SERVICES

Securities

RULE NOS.:RULE TITLES:

69W-600.006Fingerprint Requirements

69W-600.012Rules of Conduct

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

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

69W-600.0132Custody Requirements for Investment Advisers

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

69W-600.014Books and Records Requirements

69W-600.015Financial Reporting Requirements - Statement of Financial Condition – Dealers and Investment Advisers

69W-600.016Net Capital Requirements for Dealers and Investment Advisers

69W-600.017Customer Protection Rule – Reserve Requirements and Custody of Customer Funds and Securities

69W-600.020Continuing Education Requirements

PURPOSE AND EFFECT: The rules are proposed for amendment to: update references to incorporated material; correct cross-references; adopt FINRA 3240 in whole in Rule 69W-600.013, F.A.C. (previously adopted only in part); adopt MSRB Definitional Rules D-13, D-14, G-42, and G-43; adopt appendices E, F, and G to SEC Rule 15c3-1 in Rule 69W-600.016, F.A.C.; and adopt Exhibit A of SEC Rule 15c3-3 in Rule 69W-600.017, F.A.C. The Office of Financial Regulation proposes to consolidate all material incorporated by reference in Chapter 69W, F.A.C. into a new proposed Rule 69W-200.002, F.A.C. that conforms with Section 120.54(1)(i), F.S. The proposed amendments would reference Rule 69W-200.002, F.A.C., where the material can be accessed via the FAR.

SUMMARY: See above.

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: 1) No requirement for a SERC was triggered under Section 120.541(1); and 2) The amendments will not exceed any one of the economic analysis criteria in a SERC, as set forth in Section 120.541(2)(a), F.S.

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(2), 517.1217 FS.

LAW IMPLEMENTED: 517.081, 517.12(4), 517.1215, 517.1217, 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, Division of Securities, [phone], [e-mail]

 

THE FULL TEXT OF THE PROPOSED RULE IS:

 

69W-600.006 Fingerprint Requirements.

(1) No change.

(2) The requirement to submit fingerprints is waived for those associated persons pending registration in Florida with a Financial Industry Regulatory Authority (FINRA) member firm and such fingerprints have been submitted and processed by FINRA on behalf of the member firm with which said associated person is pending registration, pursuant to the provisions of SEC rule 17f-2 (17 C.F.R. § 240.17f-2), which is incorporated by reference in Rule 69W-200.002, F.A.C. (17 C.F.R. § 240.17f-2 (2010)).

(3) Notwithstanding any exemptions found in SEC rule 17f-2 (17 C.F.R. § 240.17f-2) (17 C.F.R. § 240.17f-2 (2010)), any direct owner, principal, or indirect owner that is required to be reported on Form BD, Uniform Application for Broker-Dealer Registration, or Form ADV, Uniform Application for Investment Adviser Registration, pursuant to Section 517.12(7), F.S., who is not currently registered in Florida with the firm they are seeking to join or act as a direct owner, principal, or indirect owner shall submit fingerprints to the Office through a live scan vendor approved by FDLE and published on FDLE’s website for submission to FDLE and the FBI for a state criminal background check and a federal criminal background check. The cost of fingerprint processing shall be borne by the applicant and paid directly to the live scan vendor.

(4) The requirement to submit fingerprints is waived for any direct owner, principal, or indirect owner that is required to be reported on Form BD, Uniform Application for Broker-Dealer Registration, or Form ADV, Uniform Application for Investment Adviser Registration, pursuant to Section 517.12(7), F.S., if fingerprints have been submitted and processed by FINRA on behalf of the member firm with which the owner or principal is affiliated, pursuant to the provisions of SEC Rule 17f-2 (17 C.F.R. § 240.17f-2) (17 C.F.R. § 240.17f-2 (2010)).

(5) The federal regulations referenced in this rule are hereby incorporated by reference and may be obtained by mail from the Florida Office of Financial Regulation, Division of Securities, 200 E. Gaines Street, Tallahassee, Florida 32399. Copies of the Code of Federal Regulation are also available online through the U.S. Government Printing Office via GPO Access: http://www.gpoaccess.gov/cfr/index.html.

Rulemaking Authority 215.405, 517.03 FS. Law Implemented 517.12(7), 943.053 FS. History–New 12-5-79, Amended 9-20-82, Formerly 3E-600.06, Amended 8-1-91, Formerly 3E-600.006, Amended 5-15-07, 12-24-07, 12-25-08, 11-22-10, 5-29-12, 11-11-13,________.

 

69W-600.012 Rules of Conduct.

(1) Confirmation of Transactions: Every dealer registered in this state, including those defined as issuer/dealers under Rule 69W-200.001, F.A.C., shall give or send to the customer a written confirmation at or before completion of each transaction. Such confirmation shall set forth at least the following:

(a) through (c) No change.

(d) Compliance with SEC Rule 10b-10 (17 CFR § 240.10b-10), which is incorporated by reference in Rule 69W-200.002, F.A.C., (17 CFR § 240.10b-10 (2010)) and the confirmation, preparation and disclosure requirements of SEC Rule 17a-3 (17 CFR § 240.17a-3) (17 CFR § 240.17a-3 (2010)) or MSRB Rules G-8 and G-15, which are incorporated by reference in Rule 69W-200.002, F.A.C. as those rules existed on June 23, 2010, shall be deemed compliance with this rule.

(2) through (4) No change.

(5) It shall be a violation of Section 517.301(1), F.S., for any dealer or associated person to engage in any “device, scheme, or artifice to defraud” which shall include selling or effecting the purchase of any security into, in, or from offices in this state in violation of:

(a) Sections 9, 10, 11A, 15(c) or 15(g) of the Securities Exchange Act of 1934 (15 U.S.C. §§ 78i, 78j, 78k-1, 78o(c) or 78o(g)), which are incorporated by reference in Rule 69W-200.002, F.A.C. (15 U.S.C. §§ 78i, 78j, 78k-1, 78o(c) or 78o(g) (2006 & Supp. III));

(b) SEC Rule Rules 9b-1 (17 CFR § 240.9b-1), which is incorporated by reference in Rule 69W-200.002, F.A.C. (17 CFR § 240.9b-1 (2010));

(c) SEC Rules 10b-1, 10b-3, 10b-5, 10b5-1, 10b5-2, 10b-9, 10b-10, 10b-16, 10b-17, 10b-18,  and 10b-21 (17 CFR §§ 240.10b-1, 240.10b-3, 240.10b-5, 240.10b5-1, 240.10b5-2, 240.10b-9, 240.10b-10, 240.10b-16, 240.10b-17, 240.10b-18, and 240.10b-21), which are incorporated by reference in Rule 69W-200.002, F.A.C. (17 CFR §§ 240.10b-1, 240.10b-3, 240.10b-5, 240.10b5-1, 240.10b5-2, 240.10b-9, 240.10b-10, 240.10b-16, 240.10b-17, 240.10b-18, and 240.10b-21 (2010));

(d) SEC Rules 15c1-1 through 15c1-3 and 15c1-5 through 15c1-9 (17 CFR §§ 240.15c1-1 through 240.15c1-3 and 240.15c1-5 through 240.15c1-9), which are incorporated by reference in Rule 69W-200.002, F.A.C. (17 CFR §§ 240.15c1-1 through 240.15c1-3 and 240.15c1-5 through 240.15c1-9 (2010));

(e) SEC Rules 15c2-1, 15c2-4, 15c2-5, 15c2-7, 15c2-8, 15c2-11, and 15c2-12 (17 CFR §§ 240.15c2-1, 240.15c2-4, 240.15c2-5, 240.15c2-7, 240.15c2-8, 240.15c2-11, and 240.15c2-12), which are incorporated by reference in Rule 69W-200.002, F.A.C. (17 CFR §§ 240.15c2-1, 240.15c2-4, 240.15c2-5, 240.15c2-7, 240.15c2-8, 240.15c2-11, and 240.15c2-12 (2010));

(f) SEC Rules 15g-1 through 15g-6, 15g-8, and 15g-9 (17 CFR §§ 240.15g-1 through 240.15g-6, 240.15g-8 and 240.15g-9), which are incorporated by reference in Rule 69W-200.002, F.A.C. (17 CFR §§ 240.15g-1 through 240.15g-6, 240.15g-8 and 240.15g-9 (2010));

(g) Regulation M (17 CFR 242.100 through 242.105), which is incorporated by reference in Rule 69W-200.002, F.A.C. (17 CFR 242.100 through 242.105 (2010)); or

(h) SEC Rule 601 (17 C.F.R. § 242.601), which is incorporated by reference in Rule 69W-200.002, F.A.C. (17 C.F.R. § 242.601 (2010)).

(6) All federal statutes, federal regulations, and Municipal Securities Rulemaking Board (MSRB) rules referenced in this rule are incorporated by reference and may be obtained by mail from the Florida Office of Financial Regulation, Division of Securities, 200 E. Gaines Street, Tallahassee, Florida 32399. Copies of the United States Code are also available online through the U.S. House of Representatives, Office of the Law Revision Counsel: http://uscode.house.gov/download/downloadPDF.shtml. Copies of the Code of Federal Regulation are available online through the U.S. Government Printing Office via GPO Access: http://www.gpoaccess.gov/cfr/index.html.

Rulemaking Authority 517.03(1) FS. Law Implemented 517.121, 517.301(1) FS. History–New 12-5-79, Amended 9-20-82, Formerly 3E-600.12, Amended 12-25-89, 10-14-90, 8-1-91, 6-16-92, 1-11-93, 4-11-94, 1-3-99, 8-19-99, 10-30-03, Formerly 3E-600.012, Amended 11-22-10,________.

 

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) Extending, arranging for, or participating in arranging for credit to a customer in violation of Regulation T, Credit by Brokers and Dealers, (12 C.F.R. §§ 220.1 through 220.12, 220.101, 220.103, 220.105, 220.108, 220.110, 220.111, 220.113, 220.117, 220.118, 220.119, 220.121, 220.122, 220.123, 220.124, 220.127, 220.128, 220.131, and 220.132) (2010) and 12 C.F.R. § 221.125 of Regulation U. (2010)). The foregoing rules are incorporated by reference in Rule 69W-200.002, F.A.C.

(b) through (c) No change.

(d) Hypothecating a customer’s securities in violation of SEC Rule 8c-1, (17 C.F.R. § 240.8c-1), which is incorporated by reference in Rule 69W-200.002, F.A.C. (17 C.F.R. § 240.8c-1 (2010)).

(e) through (g) No change.

(h) With respect to any customer, transaction or business in this state, violating any of the following:

1. Financial Industry Regulatory Authority (FINRA) rules contained in the Rule 2000 Series (Duties and Conflicts), Rule 3000 Series (Supervision and Responsibilities Relating to Associated Persons), Rule 4000 Series (Financial and Operational Rules), Rule 5000 Series (Securities Offering and Trading Standards and Practices), Rule 6000 Series (Quotation and Transaction Reporting Facilities), or Rule 7000 Series (Clearing, Transaction and Order Data Requirements, and Facility Charges), as such rules existed on June 28, 2010; National Association of Securities Dealers (NASD) Conduct Rules contained in the Rule 2000 Series (Business Conduct) or Rule 3000 Series (Responsibilities Relating to Associated Persons, Employees, and Others’ Employees), as such rules existed on June 28, 2010; or NASD Uniform Practice Code rules contained in the Rule 11000 Series, as such rules existed on June 28, 2010.  The foregoing rules are incorporated by reference in Rule 69W-200.002, F.A.C.

2. For members of the New York Stock Exchange, Rule 405, 412, or 435 of the New York Stock Exchange, which are incorporated by reference in Rule 69W-200.002, F.A.C. as such rules and interpretative supplementary materials existed on June 23, 2010.

3. Section 2, 3, 4, 5, or 6 of the Securities Act of 1933, (15 U.S.C.A. §§ 77b, 77c, 77d, 77e, or 77f (2006 & Supp. III)), or SEC Rules 134, 134a, 135a, 144, 144A, 156, 419, 481, or 482, (17 C.F.R. §§ 230.134, 230.134a, 230.135a, 230.144, 230.144A, 230.156, 230.419, 230.481 or 230.482 (2010)), which are incorporated by reference in Rule 69W-200.002, F.A.C.

4. Section 15(b)(4)(E) of the Securities Exchange Act of 1934, (15 U.S.C. § 78o(b)(4)(E) (2006 & Supp. III)); Regulation SHO, Regulation of Short Sales, (17 C.F.R. §§ 242.200-242.203 (2010)); or NASD Conduct Rule 3210, which are incorporated by reference in Rule 69W-200.002, F.A.C. as it existed on June 28, 2010.

5. Section 15B of the Securities Exchange Act of 1934, (15 U.S.C.A. § 78o-4 (2006 & Supp. III)), or the following rules of the Municipal Securities Rulemaking Board (MSRB), MSRB Definitional Rules D-1 to D-14 D-12, and General Rules G-1 to G-43 G-41, as those rules existed on June 23, 2010. The foregoing are incorporated by reference in Rule 69W-200.002, F.A.C.

6. No change.

(i) through (l) No change.

(m) Selling or offering for sale any security in a transaction exempt from registration pursuant to Section 517.061(17)(a)1., F.S., where the issuer of such securities has not filed with the SEC within the specified period of time all reports required by Sections 13 or 15D of the Securities Exchange Act of 1934, (15 U.S.C. §§ 78m, 78o-6), which are incorporated by reference in Rule 69W-200.002, F.A.C. (15 U.S.C. §§ 78m, 78o-6 (2006 & Supp. III)).

(n) through (o) No change.

(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) Borrowing money or securities from a customer, except when persons are in compliance with FINRA Rule 3240, which is incorporated by reference in Rule 69W-200.002, F.A.C. FINRA Rule 3240(a)(1), (a)(2)(A)-(C) only, and FINRA Conduct Rule 3240(b)-(c), as these rules existed on June 28, 2010;

(b) through (h) No change.

(3) The federal statutes, federal regulations, Financial Industry Regulatory Authority (FINRA) rules, National Association of Securities Dealers (NASD) rules, New York Stock Exchange rules, and Municipal Securities Rulemaking Board (MSRB) rules referenced in this rule are hereby incorporated by reference and may be obtained by mail from the Office of Financial Regulation, Bureau of Securities Regulation, 200 E. Gaines Street, Tallahassee, Florida 32399-0374. Copies of the United States Code are also available through the U.S. House of Representatives, Office of the Law Revision Counsel: http://uscode.house.gov/download/downloadPDF.shtml. Copies of the Code of Federal Regulation are available online through the U.S. Government Printing Office via GPO Access: http://www.gpoaccess.gov/cfr/index.html.

Rulemaking 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, 1-18-09, 11-22-10,________.

 

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) 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:

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 (2006 & Supp. III)), or SEC Rules 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. §§ 275.204-3, 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 (2010)), which are incorporated by reference in Rule 69W-200.002, F.A.C.

(b) through (q) No change.

(r) Entering into, extending or renewing any investment advisory contract contrary to the provisions of Section 205 of the Investment Advisers Act of 1940, 15 U.S.C. § 80b-5 (2006 & Supp. III). This provision shall apply to all advisers and investment adviser representatives registered or required to be registered under this Act, notwithstanding whether such adviser or representative would be exempt from federal registration pursuant to Section 203(b) of the Investment Advisers Act of 1940, (15 U.S.C. § 80b-3(b) (2006 & Supp. III)), which is incorporated by reference in Rule 69W-200.002, F.A.C. ;

(s) Including, in an advisory contract, any condition, stipulation, or provisions binding any person to waive compliance with any provision of Chapter 517, F.S., or with any provision of, or with any rule, regulation, or order issued under, the Investment Advisers Act of 1940 (15 U.S.C. § 80b-1 through 80b-21 (2006 & Supp. III)), which is incorporated by reference in Rule 69W-200.002, F.A.C.;

(t) through (u) No change.

(2) The federal statutory and regulatory provisions referenced herein shall apply to investment advisers, investment adviser representatives and federal covered advisers, to the extent permitted by the National Securities Markets Improvement Act of 1996 (Pub. L. 104-290), which is incorporated by reference in Rule 69W-200.002, F.A.C.

(3) The federal statutes and federal regulations referenced in this rule are hereby incorporated by reference and may be obtained by mail from the Office of Financial Regulation, Bureau of Securities Regulation, 200 E. Gaines Street, Tallahassee, Florida 32399-0374. Copies of the United States Code are also available online through the U.S. House of Representatives, Office of the Law Revision Counsel: http://uscode.house.gov/download/downloadPDF.shtml. Copies of the Code of Federal Regulation are available online through the U.S. Government Printing Office via GPO Access: http://www.gpoaccess.gov/cfr/index.html.

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,________.

 

69W-600.0132 Custody Requirements for Investment Advisers.

(1) Definitions. For purposes of this section:

(a) through (b) No change.

(c) “Qualified custodian” means the following independent institutions or entities that are not affiliated with the adviser by any direct or indirect common control and have not had a material business relationship with the adviser in the previous two years:

1. A bank or savings association that has deposits insured by the Federal Deposit Insurance Corporation under the Federal Deposit Insurance Act;

2. A registered broker-dealer holding the client assets in customer accounts;

3. A registered futures commission merchant registered under Section 4f(a) of the Commodity Exchange Act (7 U.S.C. § 6f (2006 & Supp. III)), which is incorporated by reference in Rule 69W-200.002, F.A.C., holding the client assets in customer accounts, but only with respect to clients’ funds and security futures, or other securities incidental to transactions in contracts for the purchase or sale of a commodity for future delivery and options thereon; and

4. A foreign financial institution that customarily holds financial assets for its customers, provided that the foreign financial institution keeps the advisory clients’ assets in customer accounts segregated from its proprietary assets.

(2) No change.

(3) Exceptions.

(a) Shares of mutual funds. With respect to shares of an “open-end company” as defined in Section 5(a)(1) of the Investment Company Act of 1940, (15 U.S.C. § 80a-5(a)(1) (2006 & Supp. III)), (“mutual fund”), which is incorporated by reference in Rule 69W-200.002, F.A.C., the investment adviser may use the mutual fund’s transfer agent in lieu of a qualified custodian for purposes of complying with subsection (2) of this rule;

(b) through (c) No change.

(d) Registered investment companies. The investment adviser is not required to comply with this rule with respect to the account of an investment company registered under the Investment Company Act of 1940 (15 U.S.C. § 80a-1 through 80a-64 (2006 & Supp. III)), which is incorporated by reference in Rule 69W-200.002, F.A.C.

(e) through (f) No change.

(4) The federal statutes referenced in this rule are hereby incorporated by reference and may be obtained by mail from the Office of Financial Regulation, Bureau of Securities Regulation, 200 E. Gaines Street, Tallahassee, Florida 32399-0374. Copies of the United States Code are also available online through the U.S. House of Representatives, Office of the Law Revision Counsel: http://uscode.house.gov/download/downloadPDF.shtml.

Rulemaking Authority 517.03(1), 517.1215 FS. Law Implemented 517.1215 FS. History–New 10-23-06, Amended 11-22-10,________.

 

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

(1) through (3) No change.

(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 brokers, dealers, investment advisers, or investment companies as defined under the Investment Company Act of 1940, 15 U.S.C. ss. 80a-2, 80a-3, which is incorporated by reference in Rule 69W-200.002, F.A.C. (2006). The cited sections of the Investment Company Act of 1940 are hereby incorporated by reference.

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

(6) This rule is based on the model rule adopted on March 20, 2008, by the North American Securities Administrators Association (NASAA) regarding the use of senior-specific certifications and professional designations. The NASAA model rule is hereby incorporated by reference.

(7) All materials incorporated by reference in this rule may be obtained by writing to: Office of Financial Regulation, 200 East Gaines Street, Tallahassee, Florida 32399-0375.

Specific Authority 517.03(1), 517.1215(2), 517.1217 FS. Law Implemented 517.1215(2), 517.1217, 517.161 FS. History–New 1-18-09,________.

 

69W-600.014 Books and Records Requirements.

Except as otherwise provided herein, every dealer, investment adviser, branch office, and associated person conducting business in this state shall prepare and maintain on a current basis, and preserve for the periods of time specified, such records, prescribed herein, as are appropriate for said dealer’s, investment adviser’s, branch office’s, or associated person’s course of business, and are sufficient to provide an audit trail of all business transactions by said dealer, investment adviser, associated person, or branch office. Associated persons who conduct business from a branch office notice-filed in this state shall be exempt from the provisions of this rule.

(1) All dealers are required to prepare and maintain appropriate books and records relating to their business as described in either SEC Rules 17a-3 or 17a-4, (17 C.F.R. §§ 240.17a-3, 240.17a-4 (2010)), or MSRB Rules G-7, G-8 and G-9, as such rules existed on June 23, 2010; and records evidencing compliance with NASD Rule Series 3000 NASD Conduct rule 3000, as such rule existed on June 23, 2010. The foregoing rules are incorporated by reference in Rule 69W-200.002, F.A.C. MSRB Rules G-7, G-8, and G-9 are incorporated by reference in subparagraph 69W-600.013(1)(h)5., F.A.C. NASD Conduct Rule 3000 is incorporated by reference in subparagraph 69W-600.013(1)(h)1., F.A.C.

(2) All issuer/dealers are required to maintain at least the following records:

(a) through (b) No change.

(c) A record of all sales of securities made by, or on behalf of, the issuer as described in and in compliance with SEC Rule 17a-3(a)(1), (17 C.F.R. § 17a-3(a)(1) (2010)), which is incorporated by reference in Rule 69W-200.002, F.A.C.;

(d) through (e) No change.

(3) All investment advisers, notwithstanding the fact that the investment adviser is not registered or required to be registered under the Investment Advisers Act of 1940, shall prepare and maintain true, accurate and current records relating to their business as described in SEC Rule 204-2, (17 C.F.R. § 275.204-2 (2010)), which is incorporated by reference in Rule 69W-200.002, F.A.C.; and have available for the Office of Financial Regulation at least the following records:

(a) through (c) No change.

(d) A file containing a copy of each record required by SEC Rule 204-2(11), (17 C.F.R. § 275.204-2(11) (2010)), including any communication by electronic media that the investment adviser circulates or distributes, directly or indirectly, to two or more persons, other than persons connected with the investment adviser.

(e) A copy of each written statement and each amendment or revision given or sent to any client or prospective client of the investment adviser in accordance with the provisions of SEC Rule 204-3, (17 C.F.R. § 275.204-3 (2010)), which is incorporated by reference in Rule 69W-200.002, F.A.C. which is incorporated by reference in paragraph 69W-600.0131(1)(a), F.A.C., and a record of the dates that each written statement, and each amendment or revision was given or offered to be given to any client or prospective client who subsequently becomes a client.

(f) For each client that was obtained by the adviser by means of a solicitor to whom a cash fee was paid by the adviser, records required by SEC Rule 206(4)-3, (17 C.F.R. § 275.206(4)-3 (2010)), which is incorporated by reference in Rule 69W-200.002, F.A.C. which is incorporated by reference in paragraph 69W-600.0131(1)(a), F.A.C.

(g) All records required by SEC Rule 204-2(16), (17 C.F.R. § 275.204-2(16) (2010)).

(h) through (k) No change.

(4) Notwithstanding other record preservation requirements of this rule, the following records or copies shall be required to be maintained in the business location of the investment adviser from which the customer or client is being provided or has been provided with investment advisory services:

(a) Records required to be preserved under paragraphs (a)(3), (a)(7)-(11), (a)(14)-(15), (b) and (c) inclusive, of SEC Rule 204-2 of the Investment Advisers Act of 1940, (17 C.F.R. § 275.204-2 (2010)), which is incorporated by reference in subsection (3); and

(b) Records or copies required under the provision of paragraphs (a)(11) and (a)(16) of SEC Rule 204-2 of the Investment Advisers Act of 1940 (17 C.F.R. § 275.204-2 (2010)), which records or related records identify the name of the investment adviser representative providing investment advice from that business location, or which identify the business location’s physical address, mailing address, electronic mailing address, or telephone number.

(5) through (6) No change.

(7) All books and records described in this rule shall be preserved in accordance with the following:

(a) Those records required under subsection (1) of this rule shall be preserved for such periods of time as specified in either SEC Rule 17a-4, (17 C.F.R. § 240.17a-4 (2010)), or MSRB Rule G-9, as such rule existed on June 23, 2010, which is incorporated by reference in paragraph 69W-600.013(1)(h), F.A.C.

(b) through (d) No change.

(e) Each investment adviser registered or required to be registered in this state and which has a business location in this state shall maintain at such business location:

1. The records or copies required under the provisions of paragraphs (a)(3), (a)(7)-(10), (a)(14)-(15), (b), and (c) of SEC Rule 204-2, (17 C.F.R. § 275.204-2 (2010)); and

2. The records or copies required under the provisions of paragraphs (3)(a)-(k) above related to customers or clients for whom the investment adviser representative provides or has provided investment advisory services; and

3. The records or copies required under the provisions of paragraphs (a)(11) and (a)(16) of SEC Rule 204-2, (17 C.F.R. § 275.204-2 (2010)), which records or related records identify the name of the investment adviser representative or which identify the business location’s physical address, mailing address, electronic mailing address, or telephone number. The records will be maintained for the period described in subsections (d) and (e) of SEC Rule 204-2, (17 C.F.R. § 275.204-2 (2010)). The investment adviser shall be responsible for ensuring compliance with the provision of this subsection. SEC Rule 204-2, (17 C.F.R. § 275-204-2 (2010)).

(8) The federal regulations, federal statutes, and Municipal Securities Rulemaking Board (MSRB) rules referenced in this rule are hereby incorporated by reference and may be obtained by mail from the Office of Financial Regulation, Bureau of Securities Regulation, 200 E. Gaines Street, Tallahassee, Florida 32399-0374. Copies of the United States Code are also available online through the U.S. House of Representatives, Office of the Law Revision Counsel: http://uscode.house.gov/download/ downloadPDF.shtml. Copies of the Code of Federal Regulation are available online through the U.S. Government Printing Office via GPO Access: http://www.gpoaccess.gov/cfr/index.html.

Rulemaking Authority 517.03(1), 517.121(1), 517.1215 FS. Law Implemented 517.121(1), 517.1215 FS. History–New 12-5-79, Amended 9-20-82, Formerly 3E-600.14, Amended 10-14-90, 8-1-91, 6-16-92, 1-11-93, 9-9-96, 6-22-98, 1-25-00, 10-30-03, Formerly 3E-600.014, Amended 10-23-06, 5-15-07, 11-22-10, 11-11-13,________.

 

69W-600.015 Financial Reporting Requirements – Statement of Financial Condition – Dealers and Investment Advisers.

(1) No change.

(2) Every dealer registered pursuant to Section 517.12, F.S., and rules thereunder shall file annually with the Office of Financial Regulation, within ninety (90) days after the conclusion of said registrant’s fiscal year, audited financial statements as prepared by an independent outside auditor, unless exempted under Rule 69W-300.002, F.A.C.

(a) No change.

(b) Every dealer defined as a broker/dealer under Rule 69W-300.002, F.A.C., shall be required to include in such audited financial statements filed verification of said broker/dealer’s compliance with the provisions of Rules 69W-600.016 and 69W-600.017, F.A.C.

(c) In lieu of the provisions of paragraph (b) above, the Office of Financial Regulation will accept those statements prepared and filed by a dealer in accordance with the provisions of SEC Rule 17a-5 (17 C.F.R. § 240.17a-5 (2010)) and SEC Rule 17a-10 (17 C.F.R. § 240.17a-10 (2010)), which are incorporated by reference in Rule 69W-200.002, F.A.C.

(3) through (4) No change.

(5) The federal regulations referenced in this rule are hereby incorporated by reference and may be obtained by mail from the Florida Office of Financial Regulation, Division of Securities, 200 E. Gaines Street, Tallahassee, Florida 32399. Copies of the Code of Federal Regulation are also available online through the U.S. Government Printing Office via GPO Access: http://www.gpoaccess.gov/cfr/index.html.

Rulemaking Authority 517.03(1), 517.12(9), 517.121(2) FS. Law Implemented 517.12(9), 517.121(2) FS. History–New 12-5-79, Amended 9-20-82, Formerly 3E-600.15, Amended 6-16-92, 10-30-03, 4-8-04, Formerly 3E-600.015, Amended 11-22-10,________.

 

69W-600.016 Net Capital Requirements for Dealers and Investment Advisers.

(1) No change.

(2) All dealer applicants and registrants shall meet and at all times maintain the net capital and ratio requirements as prescribed by SEC Rule 15c3-1 including any appendices thereto (17 C.F.R. § 240.15c3-1, 240.15c3-1a, 240.15c3-1b, 240.15c3-1c, and 240.15c3-1d, 240.15c3-1e, 240.15c3-1f, and 204.15c3-1g (2010)), computed in accordance with said rule.  The foregoing are incorporated by reference in Rule 69W-200.002, F.A.C.

(a) All reporting requirements as specified in (17 C.F.R. § 240.17a-11 (2010)), which is incorporated by reference in Rule 69W-200.002, F.A.C., when such regulation is referred in SEC Rule 15c3-1 shall be applicable with the exception that such reports and notifications required by said rule shall be forwarded to the Office of Financial Regulation as well as the other regulatory agencies specified, if applicable.

(b) All references to (17 C.F.R. § 240.17a-3 (2010)) and (17 C.F.R. § 240.17a-4 (2010)), in the foregoing and subsequent provisions of Office of Financial Regulation or SEC Rules as adopted by the Office of Financial Regulation, shall be read as to mean Office of Financial Regulation, Rule 69W-600.014, F.A.C. The foregoing SEC Rules are incorporated by reference in Rule 69W-200.002, F.A.C.

(3) Issuer/dealer or investment adviser applicants or registrants shall meet the net capital requirements of this section:

(a) Investment advisers who have custody of client funds or securities or who receive payment of advisory fees six months or more in advance and in excess of $500 per client shall maintain net capital in the amount of $25,000 calculated as prescribed by SEC Rule 15c3-1 (17 C.F.R. § 240.15c3-1 (2010)), including any ratio requirements and appendices thereto.

(b) Investment advisers who do not have custody of client funds or securities or who do not receive payment for advisory services six months or more in advance and in excess of $500 per client shall maintain net capital: (1) in the amount of $5,000 calculated as prescribed by SEC Rule 15c3-1 (17 C.F.R. § 240.15c3-1 (2010)), including any ratio requirements and appendices thereto; or (2) of at least $2,500. For purposes of option (2) of this subsection, net capital shall be defined as assets minus liabilities in accordance with United States Generally Accepted Accounting Principles.

(c) Investment advisers who compute net capital in accordance with SEC Rule 15c3-1, may exclude liabilities which are subordinated to the claims of creditors pursuant to a subordination agreement, provided such agreement complies with all terms and conditions specified in Appendix D to SEC Rule 15c3-1 (17 C.F.R. § 240.15c3-1 and 240.15c-1d (2010)), except for the requirement that such agreement be filed with and approved by the Securities and Exchange Commission. Those investment advisers who have subordination agreements in effect prior to the effective date of this subsection shall not be required to comply with the conditions specified in Appendix D to SEC Rule 15c3-1. Should the investment adviser renegotiate or enter into a new subordination agreement, the agreement must comply with the provisions of Appendix D of SEC Rule 15c3-1.

(d) No change.

(4) through (5) No change.

(6) The federal regulations referenced in this rule are hereby incorporated by reference and may be obtained by mail from the Florida Office of Financial Regulation, Division of Securities, 200 E. Gaines Street, Tallahassee, Florida 32399. Copies of the Code of Federal Regulation are also available online through the U.S. Government Printing Office via GPO Access: http://www.gpoaccess.gov/cfr/index.html.

Rulemaking Authority 517.03(1) FS. Law Implemented 517.12(9), (16) FS. History–New 12-5-79, Amended 9-20-82, Formerly 3E-600.16, Amended 10-15-86, 8-1-91, 6-29-93, 11-22-93, Formerly 3E-600.016, Amended 11-22-10,________.

 

69W-600.017 Customer Protection Rule – Reserve Requirements and Custody of Customer Funds and Securities.

All Dealer applicants and registrants subject to the net capital provisions of subsection 69W-600.016(2), F.A.C., shall be required to prepare and maintain such records and accounts as specified in, and to comply in all other respects with, the provisions of SEC Rule 15c3-3 and Exhibit A (17 C.F.R. § 240.15c3-3 and 240.15c3-3a (2010)), which are incorporated by reference in Rule 69W-200.002, F.A.C. which is hereby incorporated by reference and may be obtained by mail from the Florida Office of Financial Regulation, Division of Securities, 200 E. Gaines Street, Tallahassee, Florida 32399. Copies of the Code of Federal Regulation are also available online through the U.S. Government Printing Office via GPO Access: http://www.gpoaccess.gov/cfr/index.html.

Rulemaking Authority 517.03(1), 517.12(9), 517.121(2) FS. Law Implemented 517.12(9), 517.121(2) FS. History–New 12-5-79, Formerly 3E-600.17, Amended 6-16-92, Formerly 3E-600.017, Amended 11-22-10,________.

 

69W-600.020 Continuing Education Requirements.

(1) Failure to comply with any of the applicable continuing education requirements set forth in any one of the following shall be deemed a demonstration of unworthiness by a dealer or associated person under Section 517.161(1)(h), F.S.:

(1)(a) FINRA Rule 1250 NASD Membership and Registration Rule 1120 of the Financial Industry Regulatory Authority, which is incorporated by reference in Rule 69W-200.002, F.A.C.; as such provisions existed on June 23, 2010;

(2)(b) Rule 345A of the NYSE MKT LLC, which is incorporated by reference in Rule 69W-200.002, F.A.C. New York Stock Exchange, as such provisions existed on June 23, 2010;

(3)(c) Rule G-3(h) of the Municipal Securities Rulemaking Board, which is incorporated by reference in Rule 69W-200.002, F.A.C. as such provisions existed on June 23, 2010;

(4)(d) Rule 341A of the NYSE MKT LLC American Stock Exchange, which is incorporated by reference in Rule 69W-200.002, F.A.C. as such provisions existed on June 23, 2010;

(5)(e) Article VI, Rule 11 of the Chicago Stock Exchange, which is incorporated by reference in Rule 69W-200.002, F.A.C. as such provisions existed on June 23, 2010;

(2) The rules of the NASD, New York Stock Exchange, Municipal Securities Rulemaking Board, American Stock Exchange and Chicago Stock Exchange referenced in this rule are hereby incorporated by reference and may be obtained by mail from Florida Office of Financial Regulation, Division of Securities, 200 E. Gaines Street, Tallahassee, Florida 32399.

Rulemaking Authority 517.03(1) FS. Law Implemented 517.12(18), 517.161(1) FS. History–New 12-21-95, Amended 8-19-99, 10-30-03, Formerly 3E-600.020, Amended 11-22-10,________.

 

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: May 13, 2014

DATE NOTICE OF PROPOSED RULE DEVELOPMENT PUBLISHED IN FAR: April 15, 2014