September 11, 1991
TO: INVESTMENT ADVISER MEMBERS NO. 38-91
INVESTMENT ADVISER ASSOCIATE MEMBERS NO. 41-91
RE: INDIANA PROPOSED NEW ADVISER REGULATIONS
__________________________________________________________
The Indiana Securities Commission recently released the
attached proposed rules regarding investment adviser registration
and regulation. Although the proposals, if adopted, would be
effective January 1, 1992, the proposals contain grandfather
provisions with regard to examination requirements which must be
satisfied by October 1, 1991.
Proposed Section 7 provides that investment advisers and
their representatives must pass the Uniform Investment Adviser
Law Examination (Series 65), unless an exemption applies.
Investment advisers which were registered in Indiana on October
1, 1991 and designated a management representative on Schedule D
of Form ADV are exempt, as are investment adviser representatives
who were engaged in advisory activities on October 1, 1991 and
were listed on Schedule D to Form ADV of a registered investment
adviser. Finally, investment advisers and investment adviser
representatives may apply for a waiver of the Series 65
requirement in writing from the Securities Commissioner.
The proposed rules contain comprehensive provisions
regarding books and records, and requires non-resident advisers
to undertake to furnish the Securities Commissioner with any
materials not kept within his jurisdiction.
The proposal requires advisers to establish and maintain
written supervisory procedures which encompass (1) administrative
review and written approval of all new client accounts, (2)
periodic examination of client accounts to detect and prevent
irregularities or abuse, (3) prompt review of customer
complaints, (4) review of correspondence regarding solicitation
and execution of securities transactions effected on behalf of
clients, and (5) review and written approval of the delegation by
any client of discretionary investment authority with respect to
his or her account and the frequent, periodic examination of the
account to prevent abuses.
The rules permit performance based compensation along the
lines of Rule 205-3 under the Advisers Act. The rules also
contain procedures whereby agency cross transactions will not be
considered a dishonest or unethical practice.
A public hearing on the proposed rules will be held in
Indianapolis on September 23, 1991. Therefore, please call me at
202/955-3516 or Amy Lancellotta at 202/955-3523 with regard to
any comments you have on the attached proposals by September 17,
1991.
We will keep you informed of developments.
W. Richard Mason
Assistant Counsel - Pension
Attachment