PREPROPOSAL STATEMENT OF INQUIRY
FINANCIAL INSTITUTIONS
(Securities Division)
Subject of Possible Rule Making: The securities division is considering amending its investment adviser rules in chapter 460-24A WAC to clarify that the misleading use of professional designations is prohibited.
Statutes Authorizing the Agency to Adopt Rules on this Subject: RCW 21.20.450.
Reasons Why Rules on this Subject may be Needed and What They Might Accomplish: The division notes the growth in the use of professional designations which state or imply that a person has special expertise, certification, or training in financial planning. Use of such professional designations in connection with the offer or sale of securities or the rendering of investment advice by broker-dealers, investment advisers and their representative who do not possess special expertise, certification or training may result in the deception of investors.
Other Federal and State Agencies that Regulate this Subject and the Process Coordinating the Rule with These Agencies: Broker-dealers, investment advisers and their representatives are subject to regulation by the Securities and Exchange Commission (SEC) under federal law. Broker-dealers and their representatives are also subject to regulation by the NASD, a self-regulatory organization authorized under federal law. The only direct regulation of the use of designations by the SEC or the NASD pertains to the use of the term "investment counsel."
Process for Developing New Rule: In addition to soliciting comments from interested persons, the division will review laws from other states. If available, the division will also review any model rule developed by the North American Securities Administrators Association.
Interested parties can participate in the decision to adopt the new rule and formulation of the proposed rule before publication by contacting Faith L. Anderson, Department of Financial Institutions, Securities Division, P.O. Box 9033, Olympia, WA 98507-9033, phone (360) 725-7825, fax (360) 704-6480, e-mail fanderson@dfi.wa.gov.
July 6, 2007
Michael E. Stevenson
Director of Securities