July 9, 1990
TO: INVESTMENT ADVISER MEMBERS NO. 28-90
INVESTMENT ADVISER ASSOCIATE MEMBERS NO. 26-90
RE: VIRGINIA ALLOWS PERFORMANCE BASED FEES
__________________________________________________________
The Virginia Corporation Commission promulgated regulations
effective July 1, 1990 regarding performance based fees. A copy
of Rule 1301 is attached. Also attached is revised Rule 1100
regarding initial registration of investment adviser
representatives.
Virginia Rule 1301 is virtually identical to Rule 205-3 of
the Investment Advisers Act of 1940 which permits an adviser to
receive performance based compensation provided that certain
conditions are satisfied relating to the client's financial
sophistication and the amount of the client's assets to be
managed. In addition, the contract must represent an arms-length
agreement. Finally, the adviser must make prescribed disclosures
to the client concerning the fee arrangement.
Virginia Rule 1100 regarding application for registration
as an investment adviser representative was revised to eliminate
the opportunity for a formal hearing on applications. Instead,
the grant or denial of applications for registration may be
informally extended for up to 90 days to allow the State
Corporation Commission to gather additional information. This
period may be extended upon the applicant's written request.
We will keep you informed of further developments.
W. Richard Mason
Assistant General Counsel
Attachments