August 4, 1994
TO: INVESTMENT ADVISERS COMMITTEE NO. 43-94
ARIZONA ASSOCIATE MEMBERS
RE: ARIZONA SECURITIES DIVISION ISSUES PROPOSED INVESTMENT
ADVISER RULES
__________________________________________________________
The Arizona Securities Division (the "Division") has issued
for comment a draft copy of proposed rules governing the activities
of investment advisers. These rules are intended to implement
recent amendments to the Arizona Securities Act providing for the
regulation of investment advisers. (See Memorandum to Investment
Adviser Members No. 22-94 and Investment Adviser Associate Members
No. 20-94, dated May 11, 1994.) A copy of the proposed rules is
attached.
Article II of the proposed rules contains the substantive
provisions regulating the activities of investment advisers and
their representatives and employees. It includes rules relating
to: books and records requirements; supervision; dishonest and
unethical practices; written examination requirements; disclosure
requirements; financial statements; custody of client funds or
securities; suitability; and, advertisements.
For the most part, the proposed rules in Article II are
consistent with either the Investment Advisers Act of 1940 (the
"Advisers Act") and the rules promulgated thereunder or the NASAA
Model Amendments to the Uniform Securities Act. Some of the
exceptions to this, however, are:
(1) Rule R14-6-201, relating to books and records, which
would additionally require the maintenance of a trade blotter,
customer complaints for the prior five years, written client
acknowledgements, and client statements received from the
custodian for the prior five years;
(2) Rule R14-6-203, relating to dishonest and unethical
practices, which would require advisers with discretionary
authority to send out quarterly account statements;
(3) Rule R14-6-205, relating to disclosure requirements,
which, in addition to requiring compliance with the federal
"brochure" rule (Rule 204-3 under the Advisers Act), would
require advisers to provide written disclosure to clients of
the availability of Part I of Form ADV. Advisers would have
to maintain a statement from each client acknowledging receipt
of the disclosure. The proposed rule would also prohibit an
adviser from delivering to a client a Form ADV or brochure to
which the Division objects; and
(4) Rule R14-6-209, relating to advertisements, which would
require the pre-filing of all advertisements and all radio and
television scripts at least ten days prior to use.
Comments are due to the Division no later than Monday,
September 12, 1994. Please provide me with any comments you may
have on the proposed rules by Monday, August 29, 1994. My direct
number is 202/326-5825 and the fax number is 202/326-5828.
Tamara K. Cain
Assistant Counsel
Attachment