WSR 97-03-122

PERMANENT RULES

DEPARTMENT OF

FINANCIAL INSTITUTIONS

[Filed January 22, 1997, 8:19 a.m.]

Date of Adoption: January 16, 1997.

Purpose: To eliminate broker-dealer record-keeping regulations inconsistent with those contained in federal regulations. The National Securities Markets Improvement Act of 1996 preempted inconsistent state regulations on broker-dealer record keeping.

Citation of Existing Rules Affected by this Order: Repealing WAC 460-21B-080, 460-22B-070, 460-22B-080 and 460-24A-046; and amending WAC 460-21B-050.

Statutory Authority for Adoption: RCW 21.20.100 and 21.20.450.

Adopted under notice filed as WSR 96-24-040 on November 26, 1996.

Number of Sections Adopted in Order to Comply with Federal Statute: New 0, amended 1, repealed 4; Federal Rules or Standards: New 0, amended 0, repealed 0; or Recently Enacted State Statutes: New 0, amended 0, repealed 0.

Number of Sections Adopted at Request of a Nongovernmental Entity: New 0, amended 0, repealed 0.

Number of Sections Adopted on the Agency's own Initiative: New 0, amended 0, repealed 0.

Number of Sections Adopted in Order to Clarify, Streamline, or Reform Agency Procedures: New 0, amended 0, repealed 0.

Number of Sections Adopted using Negotiated Rule Making: New 0, amended 0, repealed 0; Pilot Rule Making: New 0, amended 0, repealed 0; or Other Alternative Rule Making: New 0, amended 0, repealed 0.

Effective Date of Rule: Thirty-one days after filing.

January 21, 1997

John L. Bley

Director

AMENDATORY SECTION (Amending WSR 95-16-026, filed 7/21/95, effective 8/21/95)

WAC 460-21B-050 Books and records of broker-dealers. (1) Each registered broker-dealer shall make, maintain, and preserve books and records in compliance with United States Securities and Exchange Commission Rules 17a-3 (17 C.F.R. 240.17a-3 (1991)), 17a-4 (17 C.F.R. 240.17a-4 (1991)), 15c2-6 (17 C.F.R. 240.15c2-6 (1991)) and 15c2-11 (17 C.F.R. 240.15c2-11 (1991) as amended in Release No. 34-29094, 56 Fed. Reg. 19148 (1991)) which are hereby incorporated by reference. To the extent that the United States Securities and Exchange Commission promulgates changes to the above-referenced rules, dealers in compliance with such rules as amended shall not be subject to enforcement action by the commission for violation of this rule to the extent that the violation results solely from the dealer's compliance with the amended rule.

(2) ((Each broker-dealer shall keep and maintain at each branch office or if the broker-dealer maintains no branch office in this state, at any office in this state where the broker-dealer conducts business, the following items relating to the operations of that branch office, which, together with any other books and records made or kept at the branch office, are open to inspection by the administrator or the administrator's designee pursuant to RCW 21.20.100:

(a) A complaint file containing every written customer complaint and a record of the action taken by the broker-dealer with respect to that complaint;

(b) A litigation file documenting each criminal or civil action filed in a state or federal court against the broker-dealer office or against any of its personnel with respect to a securities or investment advisory transaction and the disposition of any such litigation;

(c) A correspondence file containing all correspondence or copies thereof disseminated to or received from the public in connection with the business of the office;

(d) Copies of each confirmation of purchase or sale sent to each customer and each order ticket completed at the office;

(e) Copies of each periodic statement sent to a customer;

(f) Commission runs showing the amount of commissions earned by each salesperson of the broker-dealer;

(g) Copies or originals of new account records indicating the name and address of each customer or client, whether the customer or client is legally of age, the signature of the salesperson introducing the account, and the signature of the manager accepting the account for the broker-dealer. If a broker-dealer customer is associated with or employed by another broker-dealer, this fact must be recorded. In discretionary broker-dealer accounts, the broker-dealer shall also record:

(i) The age or approximate age and occupation of the customer;

(ii) The signature of the person authorizing the use of discretion;

(iii) The signature of each person authorized to exercise discretion in such account;

(h) Copies of each margin agreement;

(i) Copies of each written option agreement; and

(j) Blotter (or other records of original entry) containing an itemized daily record of all purchases and sales of securities at the office, all receipts and deliveries of securities (including certificate numbers) at the office, and all other debits and credits relating to the operation of the office. Such records shall show the amount for which each such transaction was effected, the name and amount of securities, the unit and aggregate purchase or sale price (if any), the trade date, and the name or other designation of the person from whom purchased or received or to whom sold or delivered.

(3) The administrator or the administrator's designee may copy records made, kept, or maintained pursuant to subsections (1) and (2) of this section or require a broker-dealer registered in this state to copy those records and provide the copies to the administrator in a manner reasonable under the circumstances.

(4) The records required to be kept and maintained by subsection (2) of this section may be kept or maintained on computer, microform, or other electronic data storage system if the records can be immediately produced in document form.

(5))) The administrator may, by order, upon written request and for good cause shown, waive any of the requirements of this rule.

[Statutory Authority: RCW 21.20.070 and 21.20.450. 95-16-026, 460-21B-050, filed 7/21/95, effective 8/21/95.]

REPEALER

The following section of the Washington Administrative Code is repealed:

WAC 460-21B-080 Written procedures.

REPEALER

The following sections of the Washington Administrative Code are repealed:

WAC 460-22B-070 Dual representation and affiliation.

WAC 460-22B-080 Receipt of both securities sales commission and investment adviser fees.

REPEALER

The following section of the Washington Administrative Code is repealed:

WAC 460-24A-046 Dual representation and affiliation.

Legislature Code Reviser

Register

Washington State Code Reviser's Office