* See Memorandum to Investment Advisers Committee No. 9-97, dated February 11, 1997, for a copy of the Institute*s initial comment letter.
March 5, 1997
TO: INVESTMENT ADVISERS COMMITTEE No. 11-97
RE: INSTITUTE SUPPLEMENTAL LETTER ON PROPOSED INVESTMENT
ADVISER RULES
_____________________________________________________________________________
The Institute has submitted a supplemental comment letter on the SECs proposed rules
to implement the Investment Advisers Supervision Coordination Act (the "Act"), the
investment adviser provisions of the National Securities Markets Improvement Act.* The
Institutes supplemental letter responds to the comment letter filed by the North American
Securities Administrators Association (NASAA). Set forth below is a summary of the
Institutes letter. Copies of the Institutes supplemental letter and NASAAs comment letter are
attached.
The supplemental letter focuses on two issues of threshold importance in the SECs
rulemaking -- first, the extent to which the Act preempts state laws regulating investment
advisers registered with the SEC; and second, the SECs proposed definition of "investment
adviser representative."
In its letter, NASAA asserts that the Act only preempts state authority to require
registration with the state by an SEC-registered adviser and to impose other requirements that
"flow from" such state registration. Thus, NASAA seems to believe that the Act retains state
authority to impose any requirements that, by their terms, apply to all advisers doing business
in their state, as opposed to only advisers registered therein. In response, the Institute states
that NASAAs view conflicts directly with the language, structure and unambiguous purpose
of the Act. The letter states that Congress clearly intended the Act to reallocate the regulatory
responsibilities of the SEC and the states with respect to investment advisers and not merely to
exempt large advisers from the process of state registration.
With respect to the term "investment adviser representative," NASAA claims that
Congress intended for that term to be defined by the states rather than the SEC. The Institutes
letter responds that, among other things, NASAAs position is untenable, if only in light of
other assertions in NASAAs own letter. For instance, NASAAs letter endorses the SECs
proposed definition of "place of business" (with certain modifications) and does not dispute the
SECs authority to define other terms used in the Act. The Institutes letter further notes that
states do not define the term "investment adviser representative" in a uniform manner. Thus,
leaving it to the states to define that term would result in SEC-registered advisers being subject
to disparate regulation at the state level -- a result directly in conflict with one of the overriding
goals of the Act.
Craig S. Tyle
Vice President & Senior Counsel
Attachments (in .pdf format)