February 2, 1989
TO: INVESTMENT ADVISERS COMMITTEE NO. 5-89
RE: INSTITUTE COMMENTS ON NEW YORK PROPOSED LEGISLATION
__________________________________________________________
As you may recall, a number of investment adviser
legislative proposals have been introduced in the New York
legislature during the past several years. The Institute
attended a meeting in December, 1988 concerning a bill that the
Attorney General's office believes should be adopted during the
1989 legislature. A copy of the proposed legislation and the
Institute's comment letter are attached.
In the attached letter, the Institute recommended to the
New York Attorney General's office that a proposed non-uniform
disclosure requirement in New York Assembly Bill 7528-A be
deleted. The proposed non-uniform disclosure requirement would
require that a written statement be given to prospective clients
that registration in the state of New York does not constitute a
certification or approval by the state.
In our letter, we stated that we have worked closely with
the North American Securities Administrators Association, Inc.
(NASAA) and the SEC in developing a uniform registration and
disclosure document that could be used at both the federal and
state levels. We stated that practically all states that require
disclosure by investment advisers have state disclosure laws
similar to, or the same as, Investment Advisers Act Rule 204-3,
the rule that requires advisers to deliver their "brochure" to
clients and prospective clients. We wrote that a non-uniform
disclosure provision such as the one proposed in Assembly Bill
7528-A undermines the entire system developed by the SEC and
NASAA -- a uniform system of regulation that is both consistent
with other state laws and coordinated with the federal system of
regulation for advisers. We also stated that we did not believe
the extra disclosure language would provide any additional
investor protection.
We also made a second recommendation with regard to the
proposed New York legislation related to the investment adviser
representative definition. Specifically, we recommended that the
language be changed to permit solicitation of investment advisory
accounts by licensed broker-dealers or registered representa-
tives, provided that compensation is paid only from an affiliated
entity, without having to comply with the registration
requirements for investment adviser representatives. We argued
that a registered representative or broker-dealer provides no
investment advice in those solicitations and simply refers
prospective clients to an affiliated investment advisory entity.
We will continue to keep you informed of developments in
New York.
Robert L. Bunnen, Jr.
Assistant General Counsel
Attachments