May 25, 1993
TO: INVESTMENT ADVISERS COMMITTEE NO. 13-93
DISTRICT OF COLUMBIA INVESTMENT ADVISER ASSOCIATE MEMBERS
RE: PROPOSED DISTRICT OF COLUMBIA INVESTMENT ADVISER RULES
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As we previously informed you, the District of Columbia
recently enacted legislation to regulate investment advisers.
(See Memorandum to Investment Adviser Members No. 21-93 and
Investment Adviser Associate Members No. 14-93, dated April 14,
1993.) The District's Public Service Commission recently
proposed the attached rules to implement the new statute.
The rules would require that advisers register on Form ADV
and that investment adviser representatives register on Form
U-4. Designated principals and investment adviser
representatives would have to pass the Series 65 examination.
(The proposed rules provide a six month grace period for passage
of the Series 65 exam for applications received on or before
December 31st.) The investment adviser registration fee would be
$250 per year ($125 for applications filed before December 31,
1993) and the investment adviser representative registration fee
would be $35 per year ($20 before December 31, 1993). Advisers
would have to pay a $50 fee to obtain an "opinion" or "no action"
letter from the Commission or its Securities Division.
The rules also would:
- permit performance fees, subject to conditions that
are similar to those provided by federal Rule
205-3;
- impose custody requirements similar to those in
federal Rule 206(4)-2;
- impose a suitability requirement similar to the one
in NASAA's 1987 rules under the Uniform Securities
Act;
- permit agency cross transactions subject to
conditions similar to those in federal Rule
206(3)-2; and
- require that advisers with custody maintain net capital (as
defined in Rule 15c-3 under the Securities Exchange Act) of
$25,000, and post a $10,000 surety bond if its net capital
does not exceed $35,000. (This requirement is apparently
in addition to the requirement that all advisers with
custody obtain a $10,000 surety bond.)
The rules are subject to two public notice periods,
together lasting 45 days and ending on June 21, 1993. We
understand that final rules will be issued soon after that date.
Please provide any comments you might have by Thursday, June 3,
1993. My direct number is 202/955-6251.
Thomas M. Selman
Assistant Counsel
Attachment