January 27, 1994
TO: INVESTMENT ADVISERS COMMITTEE NO. 7-94
MISSOURI INVESTMENT ADVISER ASSOCIATE MEMBERS
RE: LEGISLATION INTRODUCED IN MISSOURI TO AMEND INVESTMENT
ADVISER REGULATION
__________________________________________________________
Legislation has been introduced in Missouri to amend certain provisions of
the Missouri Uniform Securities Act (the "Act") relating to investment advisers.
This bill is substantially similar to bills considered by the Missouri
legislature during each of the past two years. (See Memoranda to Investment
Advisers Committee Nos. 9-92 and 5-93 and Missouri Investment Adviser Associate
Members, dated February 24, 1992 and March 11, 1993, respectively.) A copy of
this year's bill is attached.
Summarized below are several significant changes proposed to the Act in the
legislation.
Investment Adviser Representatives
Investment adviser representatives would be required to register under the
Act. The initial and renewal registration fees for IA representatives is
proposed to be $50. (The renewal fee for investment advisers will be increased
from $100 to $200, which is currently the initial registration fee.) Added to
this year's legislation is a provision that authorizes the Missouri Commissioner
of Securities (the "Commissioner") to prescribe by rule continuing education
requirements for investment advisers and investment adviser representatives.
Fraudulent Activities
The legislation will expand the list of activities in which it is unlawful
for an investment adviser to engage to include: (1) engaging in principal or
agency cross-transactions without providing specified written disclosure to the
client and obtaining the consent of the client to the transaction; (2) holding
itself out as a "financial planner", "financial adviser", "financial consultant"
or similar term unless such person falls within one of the categories specified
in the provision; and (3) engaging in any dishonest or unethical practice as the
Commissioner may define by rule.
Minimum Financial Requirements; Surety Bond
The Commissioner would be authorized to establish minimum financial
requirements for investment advisers, which could vary depending upon whether an
adviser has custody or discretionary authority over client funds or securities.
The Commissioner's existing authority to require investment advisers to post a
surety bond would be limited to those advisers who have custody or discretionary
authority over client funds or securities.
Disclosure
The bill would authorize the Commissioner to require that certain
information be furnished or disseminated as necessary or appropriate in the
public interest or for the protection of clients.
Private Right of Action
A private right of action similar to the one included in the NASAA Model
Amendments to the Uniform Securities Act would be included in the Act for
fraudulent activities and for violations of certain provisions of the Act
relating to investment advisers (including provisions dealing with prohibited
activities, registration requirements, unlawful representations concerning
registration or exemption and filing of sales and advertising literature). A
statute of limitations of five years has been added to the private right of
action in this year's bill.
* * * * *
A copy of the Missouri legislation is attached. If you have any comments
on the legislation, please call the undersigned at 202/326-5825.
Tamara K. Cain
Assistant Counsel