August 16, 1994
TO: INVESTMENT ADVISERS COMMITTEE NO. 44-94
WISCONSIN INVESTMENT ADVISER ASSOCIATE MEMBERS
RE: WISCONSIN PROPOSED AMENDMENTS TO RULES RELATING TO
INVESTMENT ADVISERS
__________________________________________________________
The Wisconsin Commissioner of Securities (the "Commissioner")
has issued for comment proposed amendments to various rules
promulgated under the Wisconsin Uniform Securities Act governing
the activities of investment advisers. The substantive changes
proposed by these amendments are summarized below.
1. Books and Records Requirements -- The amendments to Rule
5.03 would require each branch office of a licensed investment
adviser to prepare and keep current copies of all customer
complaints and responses thereto as well as records relating to
each customer's current securities positions. Under current law,
these records must only be maintained at the principal office of
the adviser.
2. Financial Statement Requirements -- Under the proposed
amendments to Rule 5.04, an adviser that is a sole proprietor would
be able to satisfy the annual financial statement requirement by
providing proof of cash or securities on deposit as of the
adviser's fiscal year-end evidencing net capital of at least
$5,000. Also, the amendments would (1) permit all advisers filing
financial statements the option of filing statements that are
either audited, prepared, or compiled by an independent accountant
on either a cash or accrual basis and (2) clarify that statements
need not be filed by advisers who have received a waiver of the net
capital requirements.
3. Wrap Fee Programs -- Two of the proposed amendments
relate to wrap fee programs. First, Rule 1.02(5)(c), the
definition of "transact business," would be amended to exclude
solicitors (1) that are licensed with an adviser or a broker-dealer
that is approved to provide investment advisory services or (2)
that solicit or refer fewer than ten persons to any one investment
adviser within a calendar year. This amendment is intended to
permit such solicitors for wrap fee programs from having to be
licensed with multiple investment advisers. Secondly, Rule 5.05(9)
would be amended to require advisers participating in wrap fee
arrangements to disclose to each customer under the arrangement
"the portion of the wrap fee that is attributable to advisory
services." This requirement may be satisfied if the information is
contained in the brochure required by Schedule H to Form ADV.
4. Miscellaneous -- Rule 7.01(7)(b) would be amended to
impose a fee of $100 for filing any material amendments
delinquently. Rule 9.01(1)(b) would be amended to require
investment adviser applicants to file a Form IAAA, Investment
Adviser Applicant Activities Questionnaire, a Form IAPC, Investment
Adviser Procedures Checklist, and Form IADS, Designation of
Investment Adviser Supervisory when applying for licensing.
In addition to these substantive amendments, several of the
proposed amendments are technical in nature and are intended to
either clarify existing procedures or adopt uniform forms. For
instance, Rule 5.07 would be amended to clarify that applications
for renewal of investment adviser licenses must be filed no later
than March 31; while Rules 5.08 and 9.01 would be amended to repeal
registration application forms that are unique to Wisconsin and to
adopt in their place uniform forms (i.e., Forms ADV, ADV-W, U-4 and
U-5).
A copy of these proposed rules is attached. Comments are due
to the Commissioner no later than September 27, 1994. Please
provide me with any comments you may have on the proposed rules by
Friday, September 15, 1994. My direct number is 202/326-5825 and
the fax number is 202/326-5828.
Tamara K. Cain
Assistant Counsel
Attachment