March 31, 1989
TO: INVESTMENT ADVISERS COMMITTEE NO. 18-89
RE: INSTITUTE SUBMITS COMMENTS ON PROPOSED TENNESSEE INVESTMENT
ADVISER REGULATIONS
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In the attached letter, the Institute commented on several
proposed Tennessee regulations concerning investment advisers.
Specifically, we suggested that a minimum net worth test is
more appropriate than a net capital requirement for investment
advisers. Second, we recommended that a net worth of $10,000 for
investment advisers which have discretionary authority over
client funds or securities, but do not have custody of client
funds or securities, is more appropriate than the proposed
minimum net capital requirement of not less than $25,000. Third,
we recommended that the requirement that an investment adviser
compute its net capital on a quarterly basis be deleted, and only
if the adviser maintains custody of clients funds or securities
should it be required to submit a balance sheet.
Fourth, we strongly opposed the requirement that investment
advisers be required to submit income statements. We stated that
receipt by Tennessee of profit and loss information would serve
no regulatory purpose and because most advisers consider such
income statements proprietary, we requested that the income
statement requirement be deleted.
Finally, we recommended that advisers who are domiciled in
Tennessee and whose only clients are investment companies as
defined by the Investment Company Act of 1940 be exempted from
the investment adviser registration requirement just as
investment advisers whose only clients are insurance companies.
We will keep you informed of developments in Tennessee.
Robert L. Bunnen, Jr.
Assistant General Counsel
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