June 29, 1993
TO: INVESTMENT ADVISERS COMMITTEE NO. 19-93
NEW YORK ASSOCIATE MEMBERS
RE: NEW YORK INVESTMENT ADVISERS BILL
__________________________________________________________
The New York legislature is considering two bills that would amend the
investment adviser provisions of the state's general business law. The first
bill, AB 7954, would adopt certain provisions based on the Uniform Securities
Act. These provisions would, among other things:
- require that investment adviser representatives register;
- delete the exemption from the definition of "investment adviser" for
advisers with no more than 40 clients, and replace it with an
exemption from the registration requirement for advisers who do not
have a place of business in New York and, during the previous 12
months, did not direct business communications to more than five
noninstitutional clients;
- provide that the registration filing requirement could be satisfied
by the filing of Form ADV or Form U-4;
- require advisers with custody of client funds or securities to
maintain minimum net capital of $25,000, maintain minimum net worth
of $35,000, or post surety bonds of up to $100,000, and require
advisers with discretionary authority (but not custody) to maintain
minimum net capital of $5,000, maintain minimum net worth of
$10,000, or post surety bonds of up to $100,000;
- impose record keeping requirements, which could be fulfilled if an
adviser complies with the record keeping requirements of the federal
Investment Advisers Act;
- require that clients be given Part II of Form ADV or a written
document that contains at least the information required by Part II;
- require advisers with custody of client funds or securities to file
an audited balance sheet, and advisers with discretionary authority
(but not custody) to file unaudited balance sheets;
- create an express private right of action against advisers (and
certain control persons and employees) for violation of the
antifraud provisions.
The second bill, AB 7955, would provide an express private right of action
against advisers (and certain control persons and employees) who violate the
registration requirements or who commit fraud in the offer or sale of a security.
The legislature's session is expected to end sometime in July.
Thomas M. Selman
Assistant Counsel
Attachment