1 See Memorandum to Investment Advisers Committee No. 43-94 and Arizona Associate Members, dated August 4, 1994.
September 1, 1995
TO: INVESTMENT ADVISERS COMMITTEE No. 35-95
ARIZONA ASSOCIATE MEMBERS
RE: ARIZONA SECURITIES DIVISION RE-PROPOSES INVESTMENT ADVISER
RULES
______________________________________________________________________________
In August 1994, the Arizona Securities Division issued for comment proposed rules to
implement provisions added to the Arizona Securities Act that provided for the regulation of
investment advisers.1 In the year since these rules were proposed, they have been substantially
revised by the Division as a result of comments received and are now being reissued for
comment. A copy of the revised proposal is attached. One major distinction between the
previous draft and the current draft is that, while the provisions in the previous draft applied to
licensed advisers or persons required to be licensed as an adviser, the revised proposal applies to
all investment advisers -- including those exempt from licensure.
For the most part, the revised rule proposal is 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:
Rule 6-201, Books and Records
In addition to the requirements under the Advisers Act, this rule would require
each adviser to maintain: a file containing each customer complaint received; a
copy of correspondence relating to a clients account in that clients file; and, the
clients written acknowledgment as required by Rule 6-205.
Rule 6-203, Dishonest and Unethical Practices
Included in the list of dishonest and unethical practices are:
(1) failing to disclose in writing to advisory clients "undisclosed,
conflicting securities positions";
(2) failing to disclose "in writing to the client, all disciplinary questions
affirmatively answered in Part I of Form ADV, and the answers thereto";
(3) failing to have a written contract with advisory clients, even those to
whom the adviser provides only impersonal advice;
(4) for advisers with discretionary authority, failing to provide itemized
customer statements containing specified information on both an annual and a
quarterly basis; and
(5) for advisers that charge fees other than on an hourly or fixed fee basis,
failing to provide an itemized statement, on at least an annual basis, indicating
the total fees and commissions earned by the adviser during the period.
Rule 6-205, Information to be Furnished to Clients
This rule would require each adviser to disclose in writing to each client initially
retained after the effective date of the rule the availability upon request of Part I
of Form ADV and the nature of the information provided therein. The adviser
must maintain in each client file a statement acknowledging receipt of the
disclosure. Compliance with this provision, however, will not alleviate an
advisers duty to provide the disciplinary information from Part I of Form ADV
to clients as would be required by Rule 6-203.
Rule 6-208, Advertisements
This rule would, "when requested by the Commission", require the filing of an
advertisement at least ten days prior to its proposed use.
Comments are due to the Division no later than Thursday, October 19, 1995. Please provide
me by phone (202/326-5825) or by fax (202/326-5839) with any comments you may have on the
proposed rules by Monday, September 11, 1995.
Tamara K. Cain
Assistant Counsel
Attachment
Note: Not all recipients of this memo will receive an attachment. If you wish to obtain a copy
of the attachment referred to in this memo, please call the Institute’s Information Resource
Center at (202)326-8305 or (202)326-5903, and ask for this memo’s attachment number: 7236.