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June 19, 1990
TO: INVESTMENT ADVISER MEMBERS NO. 25-90
INVESTMENT ADVISER ASSOCIATE MEMBERS NO. 23-90
RE: ALABAMA TO REGULATE INVESTMENT ADVISERS
__________________________________________________________
Effective January 1, 1991, the State of Alabama will
require registration of investment advisers and investment
adviser representatives pursuant to the newly enacted Alabama
Securities Act. A copy of the relevant provisions of the Act is
attached.
The Act requires each investment adviser to register with
the Alabama Securities Commission unless (1) all his clients are
investment companies, other investment advisers, broker-dealers,
banks, trust companies, savings and loan associations, insurance
companies, employee benefit plans over $1,000,000, government
agencies and other institutional investors or (2) he has no place
of business in Alabama and directs no business communications in
Alabama to more than 5 clients in Alabama.
An "investment adviser" is generally defined under the Act
as a person who, for compensation, advises others regarding
securities. The term also includes financial planners who hold
themselves out as providing investment advisory services.
Excluded from the definition of investment advisers are
depository institutions, lawyers, accountants, engineers and
teachers whose performance of investment advisory services is
incidental to the practice of their profession, broker-dealers
and the news media. "Investment adviser representatives" are
generally defined as employees or partners of an investment
adviser and who make securities recommendations, manage client
portfolios determine which recommendation or advice regarding
securities should be given and solicit business (unless selling
activities are incidental and the person is a registered dealer).
Under the new law, investment advisers must pay an annual
registration fee of $200 and investment adviser representatives
must pay a $50 annual registration fee. The Alabama Securities
Commission shall issue rules indicating whether all or any class
of registrants must be bonded in an amount of $50,000 or more.
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The Commission is also responsible for establishing minimum
financial requirements for investment advisers and determining
whether materials in addition to those required by the Investment
Advisers Act of 1940 must be filed with the Commission. These
regulations are expected in the latter part of this year.
In addition, the Act prohibits performance fees, unless
permitted by rule or order of the Commission and provides for a
private right of action.
We will keep you informed of further developments.
W. Richard Mason
Assistant General Counsel
Attachment