PROPOSED RULES
FINANCIAL INSTITUTIONS
(Securities Division)
Original Notice.
Preproposal statement of inquiry was filed as WSR 07-15-011.
Title of Rule and Other Identifying Information: The securities division proposes to amend its rules to provide further clarification of when a person holds himself or herself out as a "financial planner" or "investment counselor." The rules the division proposes to amend are set forth in WAC 460-24A-040 and 460-24A-045.
Hearing Location(s): Department of Financial Institutions, 150 Israel Road S.W., Room 319, Tumwater, WA 98501, on May 27, 2008, at 2:00 p.m.
Date of Intended Adoption: May 28, 2008.
Submit Written Comments to: Faith L. Anderson, Department of Financial Institutions, Securities Division, P.O. Box 9033, Olympia, WA 98507-9033, e-mail fanderson@dfi.wa.gov, fax (360) 704-6480, by May 27, 2008.
Assistance for Persons with Disabilities: Contact Carolyn Hawkey, P.O. Box 9033, Olympia, WA 98507-9033, by May 20, 2008, TTY (360) 664-8126 or (360) 902-8774.
Purpose of the Proposal and Its Anticipated Effects, Including Any Changes in Existing Rules: The securities division proposes to amend its rules to clarify that a person who uses a term or abbreviation thereof, or engages in any conduct, that would lead a reasonable person to believe that the person is holding himself or herself out as a "financial planner" or "investment counselor" and is therefore subject to registration as an investment adviser under RCW 21.20.0040 unless that person falls within the exception set forth in WAC 460-24A-045 for those that would not otherwise be considered an investment adviser. In order to achieve this goal, the division proposes amendments to WAC 460-24A-040 to provide that a person not only holds himself or herself out as a "financial planner" or "investment counselor" when the person uses any of the terms already listed in that section, but also when the person "uses any other term or abbreviation thereof, or engages in any conduct, that would lead a reasonable person to believe that the person is holding himself or herself out as a "financial planner" or "investment counselor." The division also proposes amendments to the exception for persons that would otherwise be considered investment advisers set forth in WAC 460-24A-045 to make minor changes to accommodate the proposed amendments to WAC 460-24A-040. Text of the proposed amendments to the division's rules is shown below.
Reasons Supporting Proposal: The amendments proposed by the division should be adopted to provide greater clarity regarding when a person holds himself or herself out as an investment adviser, particularly given the growing use of professional designations that state or imply that a person has special expertise, certification, or training in financial planning, including the growing use of senior designations and certifications. The division has concerns that these types of designations are being used by persons that are not registered as investment advisers.
Statutory Authority for Adoption: RCW 21.20.450, 21.20.005(6), 21.20.040(4).
Statute Being Implemented: Chapter 21.20 RCW.
Rule is not necessitated by federal law, federal or state court decision.
Name of Proponent: Department of financial institutions, securities division, governmental.
Name of Agency Personnel Responsible for Drafting: Faith L. Anderson, 150 Israel Road S.W., Olympia, WA 98501, (360) 725-7825; Implementation: Scott Jarvis, 150 Israel Road S.W., Olympia, WA 98501, (360) 902-8700; and Enforcement: Michael E. Stevenson, 150 Israel Road S.W., Olympia, WA 98501, (360) 902-8824.
No small business economic impact statement has been prepared under chapter 19.85 RCW. The Securities Act of Washington, chapter 21.20 RCW, and the existing rules adopted thereunder already subject persons who hold themselves out as "financial planners" or "investment counselors" to registration as investment advisers. Therefore, the adoption of the amendments to existing rules proposed in this notice will not add any additional compliance burdens for those subject to the rules but will provide greater clarity to those subject to these rules. If any costs are borne by businesses in connection with the proposed rules, these costs will be no more than minor. As such, the agency is not required to prepare a small business economic impact statement under RCW 19.85.030.
A cost-benefit analysis is not required under RCW 34.05.328. The department of financial institutions is not one of the agencies listed in RCW 34.05.328.
April 22, 2008
Scott Jarvis
Director
OTS-1465.4
AMENDATORY SECTION(Amending WSR 00-01-001, filed 12/1/99,
effective 1/1/00)
WAC 460-24A-040
Use of certain terms.
(((1))) For the
purposes of RCW 21.20.040(((3))) (4), ((use of any term, or
abbreviation for a term, including the word)) a person holds
himself or herself out as a "financial planner" or ((the
word)) "investment counselor" ((is considered the same as the
use of either of those terms alone.
(2) For the purposes of RCW 21.20.040(3), terms that are deemed similar to "financial planner" and "investment counselor" include, but are not limited to,)) when the person:
(1) Uses any of the following terms or abbreviations thereof:
(a) Financial consultant;
(b) Investment consultant;
(c) Money manager;
(d) Investment manager;
(e) Investment planner;
(f) Chartered financial consultant ((or its
abbreviation)) (ChFC); or
(g) ((The abbreviation CFP.)) Chartered financial planner
(CFP); or
(2) Uses any other term or abbreviation thereof, or engages in any conduct, that would lead a reasonable person to believe that the person is holding himself or herself out as a "financial planner" or "investment counselor."
[Statutory Authority: RCW 21.20.450. 00-01-001, § 460-24A-040, filed 12/1/99, effective 1/1/00; 97-16-050, § 460-24A-040, filed 7/31/97, effective 8/31/97. Statutory Authority: RCW 21.20.040(2) and 21.20.450. 93-01-113, § 460-24A-040, filed 12/21/92, effective 1/21/93; 90-13-029, § 460-24A-040, filed 6/12/90, effective 7/13/90.]
(1) The person is not in the business of providing advice
relating to the purchase or sale of securities, and would not,
but for ((his)) the use of ((such a)) certain terms or
abbreviations thereof as set forth in WAC 460-24A-040(1) or
engaging in certain conduct set forth in WAC 460-24A-040(2),
be an investment adviser required to register pursuant to RCW 21.20.040; and
(2) The person does not directly or indirectly receive a fee for providing investment advice. Receipt of any portion of a "wrap fee," that is, a fee for some combination of brokerage and investment advisory services, constitutes receipt of a fee for providing investment advice for the purpose of this section; and
(3) The person delivers to every customer, at least forty-eight hours before accepting any compensation, including commissions from the sale of any investment product, a written disclosure including the following information:
(a) The person is not registered as an investment adviser
or investment adviser ((salesperson)) representative in the
state of Washington;
(b) The person is not authorized to provide financial planning or investment advisory services and does not provide such services; and
(c) A brief description of the person's business which description should include a statement of the kind of products offered or services provided (e.g., the person is in the business of selling securities and insurance products) and of the basis on which the person is compensated for the products sold or services provided; and
(4) The person has each customer to whom a disclosure described in subsection (3) of this section is given sign a written dated acknowledgment of receipt of the disclosure; and
(5) The person shall retain the executed acknowledgments of receipt required by subsection (4) of this section and of the disclosure given for so long as the person continues to receive compensation from such customers, but in no case for less than three years from the date of execution of the acknowledgment;
(6) If the person received compensation from the customer on more than one occasion, the person need give the customer the disclosure described in subsection (3) of this section only on the first occasion unless the information in the disclosure becomes inaccurate, in which case the person must give the customer updated disclosure before receiving further compensation from the customer.
[Statutory Authority: RCW 21.20.450. 97-16-050, § 460-24A-045, filed 7/31/97, effective 8/31/97. Statutory Authority: RCW 21.20.040(2) and 21.20.450. 93-01-113, § 460-24A-045, filed 12/21/92, effective 1/21/93.]