The purpose and effect is to implement Chapter 2023-205, Laws of Florida, and Chapter 2024-168, Laws of Florida, amend the professional designations which satisfy the examination requirements pertaining to examination requirements ....

 

DEPARTMENT OF FINANCIAL SERVICES

Securities

RULE NOS.:RULE TITLES:

69W-600.0016Application for Registration as an Investment Adviser (State Registered)

69W-600.0018Notice-Filing and Requirements for Florida Intrastate Crowdfunding Issuers

69W-600.0019Registration of Florida Intrastate Crowdfunding Intermediaries

69W-600.002Application for Registration as Associated Person (FINRA Dealer)

69W-600.0022Application for Registration as an Associated Person (Non-FINRA Dealer)

69W-600.0024Application for Registration as an Associated Person (Investment Adviser and Federal Covered Advisor)

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

PURPOSE AND EFFECT: The purpose and effect is to implement Chapter 2023-205, Laws of Florida, and Chapter 2024-168, Laws of Florida, amend the professional designations which satisfy the examination requirements pertaining to examination requirements for associated persons of investment advisers and federal covered advisers, to permit an associated person of an investment adviser to borrow money or securities or lend money or securities to a client under certain limited circumstances and with prior written notice to the investment adviser or federal covered adviser, and to update cross-references.

SUMMARY: The rules are amended to implement Chapter 2023-205, Laws of Florida, by amending Form OFR-MIL-001, Office of Financial Regulation Active Military Member/Veteran/Spouse Fee Waiver and Military Service Verification, and Chapter 2024-168, Laws of Florida, which made changes to the Florida Limited Offering Exemption (formerly Florida Intrastate Crowdfunding), to amend the professional designations which satisfy the examination requirements pertaining to examination requirements for associated persons of investment advisers and federal covered advisers, to permit an associated person of an investment adviser to borrow money or securities or lend money or securities to a client under certain limited circumstances and with prior written notice to the investment adviser or federal covered adviser, and to update cross-references.

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 these rules.

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, 517.0611, 517.12, 517.121, 517.1215, 517.1611, FS.

LAW IMPLEMENTED: 517.0611, 517.12, 517.161, 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: Ryann White, Office of General Counsel [phone], [e-mail].

 

THE FULL TEXT OF THE PROPOSED RULE IS:

 

69W-600.0016 Application for Registration as an Investment Adviser (State Registered).

(1) through (5) No change.

(6) Examinations/Qualifications Requirements.

(a) through (e) No change.

(f) The examination requirement for an associated person of an investment adviser designated as principal shall not apply to a principal who currently holds one of the following professional designations:

1. Certified Financial Planner (TM) or (CFP®) awarded by the Certified Financial Planner Board of Standards, Inc.;

2. Chartered Financial Consultant (ChFC) awarded by the American College of Financial Services , Bryn Mawr, PA;

3. No change.

4. Chartered Financial Analyst (CFA) awarded by the CFA Institute of Chartered Financial Analysts; or

5. Certified Investment Management Analyst (CIMA) awarded by the Investment & Wealth Institute Chartered Investment Counselor (CIC) awarded by the Investment Counsel Association of America, Inc.

(7) through (12) No change.

Rulemaking Authority 517.03(1), 517.12, 517.121(1) FS. Law Implemented 517.12 FS. History–New 12-29-15, Amended 11-26-19, 1-18-21, 2-14-23, 3-21-24,             .

 

69W-600.0018 Notice-Filing and Requirements for Florida Limited Offering Exemption Intrastate Crowdfunding Issuers.

(1) Notice-filing.

(a) An issuer of securities under the Florida Limited Offering Intrastate Crowdfunding Exemption, Section 517.0611, F.S., shall file the Notice of Florida Limited Offering Exemption Crowdfunding Issuer Offering (Form FLO FL-CI) electronically on the Office of Financial Regulation’s (Office)’s website at https://real.flofr.com through the Regulatory Enforcement and Licensing (REAL) System. The notice-filing shall include all information required by such form and payment of the statutory fees required by Section 517.0611(5), F.S. The notice-filing shall be deemed received on the date the Office issues a confirmation of submission and payment to the issuer via the Office’s website.

(b) A notice-filing shall include the following:

1. Notice of Florida Limited Offering Pursuant to Section 517.0611, Florida Statutes, Form FLO, effective 10/2024 Form FL-CI (10/15). A sample form (which includes its instructions, which define certain terms in Section 517.0611, F.S.) is hereby incorporated by reference and available at http://www.flrules.org/Gateway/reference.asp?No=Ref-XXXXX http://www.flrules.org/Gateway/reference.asp?No=Ref-06073 or from the Office at https://flofr.gov/XXXXX https://flofr.gov/sitePages/documents/FormFL-CI.pdf.

2. Documentation required to be uploaded in PDF form to the REAL System as part of the notice-filing, including:

a. Verification of the issuer’s organization under the laws of Florida, pursuant to Section 517.0611(5)(g), F.S.;

b. A copy of the issuer’s escrow agreement with a financial institution, pursuant to Section 517.0611(8), F.S.; and,

c. A copy of the issuer’s disclosure statement, pursuant to Section 517.0611(8) 517.0611(7), F.S.

3. Statutory fee in the amount required by Section 517.0611(5), F.S.

(2) Amendment of Notice Filing notice-filing.  If the information contained in the Form FLO FL-CI becomes inaccurate for any reason, the issuer shall amend the information by filing an amended Form FLO FL-CI with the Office within ten (10) thirty (30) days of the change. Issuers shall amend information by filing the Form FLO FL-CI electronically with the Office through the REAL System. Failure to file amendments shall be considered a violation of Section 517.0611(6), F.S.

(3) Termination of notice-filing. Where an issuer cancels or terminates its notice-filing for any reason, notice of such fact shall be filed electronically with the Office on the Form FLO FL-CI through the REAL System within ten (10) thirty (30) calendar days of the date of cancellation or termination.

(4) Financial statements. For purposes of subparagraphs 517.0611(8)(k)2. and 3. 517.0611(7)(h)2. and 3., F.S.:

(a) through (b) No change.

(5) Disclosure statement. Certain terms used in Section 517.0611(8) 517.0611(7), F.S., regarding the disclosure statement required to be provided by the issuer, are defined in Preparing a Disclosure Statement for a Florida Limited Intrastate Crowdfunding Offering Pursuant to Section 517.0611, F.S., (Supplement FLO, effective 10/2024 CI). A sample form Supplement CI (10/15) is hereby incorporated by reference as part of this rule and is available at http://www.flrules.org/Gateway/reference.asp?No=Ref-XXXXX http://www.flrules.org/Gateway/reference.asp?No=Ref-06075, or from the Office at https://flofr.gov/XXXXX https://flofr.gov/sitePages/documents/SupplementCI.pdf.

PROPOSED EFFECTIVE DATE: October 1, 2024

Rulemaking Authority 517.03(1), 517.0611 FS. Law Implemented 517.0611 FS. History–New 12-29-15,                     .

 

69W-600.0019 Registration of Florida Limited Offering Intrastate Crowdfunding Intermediaries.

(1) New Applications.

(a) No change.

(b) An application shall include the following:

1. Registration of Florida Limited Offering Crowdfunding Intermediary Application, Form FLO-INT (10/24), effective 10/2024. FL-INT (10/15) A sample form (which includes its instructions, which define certain terms in Section 517.12(19), F.S.) is hereby incorporated by reference and available at  http://www.flrules.org/Gateway/reference.asp?No=Ref-XXXXX http://www.flrules.org/Gateway/reference.asp?No=Ref-06074, or from the Office at https://flofr.gov/XXXXX https://flofr.gov/sitePages/documents/FormFL-INT.pdf;

2. through 4. No change.

(2) through (7) No change.

PROPOSED EFFECTIVE DATE: October 1, 2024

Rulemaking Authority 517.03(1), 517.12(19), 517.121(1), 517.1611 FS. Law Implemented 517.12(19), 517.1611 FS. History–New 12-29-15, Amended 1-18-21, 3-21-24,         .

 

69W-600.002 Application for Registration as Associated Person (FINRA Dealer).

(1) New Applications.

(a) No change.

(b) An application shall include the following:

1. through 2. No change.

3. Persons requesting a fee waiver as set forth in Section 517.12(9), F.S., shall submit Office of Financial Regulation Active Military Member/Veteran/Spouse Fee Waiver and Military Service Verification, Form OFR-MIL-001, effective XX/2024 09/2018. A sample form is hereby incorporated by reference and available at http://www.flrules.org/Gateway/reference.asp?No=Ref-XXXXX or from the Office at https://flofr.gov/XXXXX http://www.flrules.org/Gateway/reference.asp?No=Ref-09913. Form OFR-MIL-001 shall be submitted within one hundred eighty (180) days after receipt of the application.

4. through 5. No change.

(2) through (7) No change.

(8) Renewal Requirement.

(a) through (b) No change.

(c) Persons requesting a fee waiver as set forth in Section 517.12(10) F.S., shall submit Office of Financial Regulation Active Military Member/Veteran/Spouse Fee Waiver and Military Service Verification, Form OFR-MIL-001, effective XX/2024 09/2018. A sample form is hereby incorporated by reference and available at http://www.flrules.org/Gateway/reference.asp?No=Ref-XXXXX or from the Office at https://flofr.gov/XXXXX http://www.flrules.org/Gateway/reference.asp?No=Ref-09913. Form OFR-MIL-001 shall be submitted within one hundred eighty (180) days after receipt of the renewal fees.

(9) through (11) No change.

Rulemaking Authority 517.03(1), 517.12, 517.121(1) FS. Law Implemented 517.12 FS. History–New 9-20-82, Formerly 3E-301.02, Amended 10-15-86, 10-4-88, 6-24-90, 7-29-90, 10-14-90, 8-1-91, 6-16-92, 6-28-93, 11-14-93, 3-13-94, 4-30-96, 12-29-96, 6-22-98, 5-10-00, 9-19-00, 7-31-02, 12-11-03, Formerly 3E-600.002, Amended 3-16-06, 5-15-07, 12-24-07, 12-25-08, 11-22-10, 5-29-12, 11-11-13, 12-29-15, 9-25-18, 11-26-19, 1-18-21, 2-14-23, 3-21-24,             .

 

69W-600.0022 Application for Registration as Associated Person (Non-FINRA Dealer).

(1) New Applications.

(a) No change.

(b) An application shall include the following:

1. through 2. No change.

3. Persons requesting a fee waiver as set forth in Section 517.12(9), F.S., shall submit Office of Financial Regulation Active Military Member/Veteran/Spouse Fee Waiver and Military Service Verification, Form OFR-MIL-001, effective XX/2024 09/2018. A sample form is hereby incorporated by reference and available at http://www.flrules.org/Gateway/reference.asp?No=Ref-XXXXX or from the Office at https://flofr.gov/XXXXX http://www.flrules.org/Gateway/reference.asp?No=Ref-09913. Form OFR-MIL-001 shall be submitted within one hundred eighty (180) days after receipt of the application.

4. through 5. No change.

(2) through (7) No change.

(8) Renewal Requirement.

(a) through (b) No change.

(c) Persons requesting a fee waiver as set forth in Section 517.12(10) F.S., shall submit Office of Financial Regulation Active Military Member/Veteran/Spouse Fee Waiver and Military Service Verification, Form OFR-MIL-001, effective XX/2024 09/2018. A sample form is hereby incorporated by reference and available at http://www.flrules.org/Gateway/reference.asp?No=Ref-XXXXX or form the Office at https://flofr.gov/XXXXX http://www.flrules.org/Gateway/reference.asp?No=Ref-09913. Form OFR-MIL-001 shall be submitted within one hundred eighty (180) days after receipt of the renewal fees.

(9) through (10) No change.

Rulemaking Authority 517.03(1), 517.12, 517.121(1) FS. Law Implemented 517.12 FS. History–New 12-29-15, Amended 9-25-18, 11-26-19, 1-18-21, 2-14-23, 3-21-24,                .

 

69W-600.0024 Application for Registration as Associated Person (Investment Adviser and Federal Covered Adviser).

(1) New Applications.

(a) No change.

(b) An application shall include the following:

1. through 2. No change.

3. Persons requesting a fee waiver as set forth in Section 517.12(9), F.S., shall submit Office of Financial Regulation Active Military Member/Veteran/Spouse Fee Waiver and Military Service Verification, Form OFR-MIL-001, effective XX/2024 09/2018. A sample form is hereby incorporated by reference and available at http://www.flrules.org/Gateway/reference.asp?No=Ref-XXXXX or from the Office at https://flofr.gov/XXXXX http://www.flrules.org/Gateway/reference.asp?No=Ref-09913. Form OFR-MIL-001 shall be submitted within one hundred eighty (180) days after receipt of the application.

4. through 5. No change.

(2) through (5) No change.

(6) Examinations/Qualifications.

(a) through (e) No change.

(f) The examination requirement for associated persons of an investment adviser or federal covered adviser shall not apply to an applicant who currently holds one of the following professional designations:

1. Certified Financial Planner (TM) or (CFP®) awarded by the Certified Financial Planner Board of Standards, Inc.;

2. Chartered Financial Consultant (ChFC) awarded by the American College of Financial Services , Bryn Mawr, PA;

3. No change.

4. Chartered Financial Analyst (CFA) awarded by the CFA Institute of Chartered Financial Analysts; or

5.  Certified Investment Management Analyst (CIMA) awarded by the Investment & Wealth Institute Chartered Investment Counselor (CIC) awarded by the Investment Counsel Association of America, Inc.

(7) No change.

(8) Renewal Requirement.

(a) through (b) No change.

(c) Persons requesting a fee waiver as set forth in Section 517.12(10) F.S., shall submit Office of Financial Regulation Active Military Member/Veteran/Spouse Fee Waiver and Military Service Verification, Form OFR-MIL-001, effective XX/2024 09/2018. A sample form is hereby incorporated by reference and available at http://www.flrules.org/Gateway/reference.asp?No=Ref-XXXXX or from the Office at https://flofr.gov/XXXXX http://www.flrules.org/Gateway/reference.asp?No=Ref-09913. Form OFR-MIL-001 shall be submitted within one hundred eighty (180) days after receipt of the renewal fees.

(9) through (10) No change.

Rulemaking Authority 517.03(1), 517.12, 517.121(1) FS. Law Implemented 517.12 FS. History–New 12-29-15, Amended 9-25-18, 11-26-19, 1-18-21, 2-14-23, 3-21-24,               .

 

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 violations by an investment adviser or an associated person of an investment adviser under Section 517.161(1)(a), F.S., without limiting that term to the practices specified herein:

(a) No change.

(b) Borrowing money or securities from or lending money or securities to a client unless the associated person provides prior written notice to the investment adviser and the borrowing or lending arrangement meets one of the following conditions: client is a dealer, an affiliate of the investment adviser, or a financial institution engaged in the business of loaning funds.

1.The investment adviser is a financial institution engaged in the business of making loans;

2. The client is an affiliate of the investment adviser;

3. The client is a financial institution engaged in the business of loaning funds;

4. The client is a dealer;

5. The client is a parent, grandparent, mother-in-law or father-in-law, husband or wife, brother or sister, brother-in-law or sister-in-law, son-in law or daughter-in-law, child, grandchild, cousin, aunt or uncle, or niece or nephew of an associated person of the investment adviser, or the client is any other person whom the associated person supports, directly or indirectly, to a material extent;

6. The lending arrangement is based on a personal relationship with the client, such that the loan would not have been solicited, offered, or given had the client and the associated person not maintained a relationship outside the investment adviser-client relationship; or

7. The lending arrangement is based on a business relationship ouside of the investment adviser-client relationship.

(c) Loaning money or securities to a client unless the investment adviser is a financial institution engaged in the business of making loans or the client is an affiliate of the investment adviser.

(d) Recommending to a client the purchase, sale or exchange of any security without reasonable grounds to believe that the recommendation is suitable for the client on the basis of information furnished by the client after reasonable inquiry concerning the client’s investment objectives, financial situation and needs, and any other information known by the investment adviser.

(d) (e) Exercising any discretionary power in placing an order for the purchase or sale of securities for a client’s account without first obtaining written discretionary authority from the client, unless the discretionary power relates solely to the time or price for the execution of orders.

(e) (f) Inducing trading in a client’s account which is excessive in size or frequency in view of the financial resources, investment objectives, and character of the account.

(f) (g) Placing an order to purchase or sell a security on behalf of a client without authority to do so.

(g) (h) Placing an order to purchase or sell a security for a client’s account upon instruction of a third party without first having obtained a written third-party trading authorization from the client.

(h) (i) Misrepresenting the qualifications of the investment adviser or any employee of the investment adviser to a client or prospective client when the representation does not fairly describe the nature of the services offered, the qualifications of the person offering the services, and the method of compensation for the services or omitting to state a material fact.

(i) (j) Charging a client an unreasonable advisory fee.

(j) (k) Failing to disclose to clients in writing before any advice is rendered any material conflict of interest relating to the adviser or any of its employees which could reasonably be expected to impair the rendering of unbiased and objective advice including:

1. through 2. No change.

(k) (l) No change.

(l) (m) Recommending to a client that the client engage the services of a dealer that is not registered or exempt from registration under Chapter 517, F.S., unless the client is a person described in Section 517.061(9) 517.061(7), F.S.

(m) (n) Recommending to a client that the client engage the services of a dealer in connection with which the investment adviser receives a fee or remuneration from the dealer, except as permitted in subsection 69W-600.0024(4), F.A.C.

(n) (o) Disclosing the identity, affairs, or investments of any client unless required to do so by law or consented to in writing by the client.

(o) (p) Giving false or otherwise misleading client information to any financial institution or regulatory agency.

(p) (q) Entering into, extending or renewing any investment advisory contract unless such contract is in writing and discloses, in substance, the services to be provided, the term of the contract, the advisory fee, the formula for computing the fee, the amount of prepaid fee to be returned in the event of contract termination or non-performance, whether the contract grants discretionary power to the adviser and that no assignment of such contract shall be made by the investment adviser without the consent of the other party to the contract.

(q) (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. This provision shall apply to all advisers and associated persons of investment advisers registered or required to be registered under this Act, notwithstanding whether such adviser or associated person 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)), which is incorporated by reference in Rule 69W-200.002, F.A.C.

(r) (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), which is incorporated by reference in Rule 69W-200.002, F.A.C.

(s) (t) Taking any action, directly or indirectly, with respect to those securities or funds in which any client has any beneficial interest, where the investment adviser has custody or possession of such securities or funds when the adviser’s action is subject to and does not comply with the requirements of Rule 69W-600.0132, F.A.C.

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

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

(v) (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 Chapter 517, F.S., and Division 69W, F.A.C.

(w) (x) Charging a client an advisory fee greater than the amount authorized in the written investment advisory contract between the client and the investment adviser.

(2) No change.

Rulemaking Authority 517.03(1), 517.1215 FS. Law Implemented 517.12(3), 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, 5-6-15, 11-15-16, 11-26-19, 1-18-21, 2-14-23, 3-21-24,              .

 

NAME OF PERSON ORIGINATING PROPOSED RULE: Alisa G. Goldberg, Director, Division of Securities

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

DATE PROPOSED RULE APPROVED BY AGENCY HEAD: June 12, 2024

DATE NOTICE OF PROPOSED RULE DEVELOPMENT PUBLISHED IN FAR: June 20, 2024