FINAL BILL REPORT

SSB 5085

                              C 391 L 89

BYSenate Committee on Financial Institutions & Insurance (originally sponsored by Senators von Reichbauer, Moore, Smitherman, Rasmussen and Johnson)

Regulating financial planners.

Senate Committee on Financial Institutions & Insurance

House Committe on Financial Institutions & Insurance

SYNOPSIS AS ENACTED

BACKGROUND:

Few states have laws regulating financial planners or financial planning.  Many financial planners function as investment advisers giving advice relating to securities and are therefore regulated under state securities laws.

Financial planners examine a client's finances and investments and then recommend a plan for achieving financial and investment goals.  Trade associations require planners to possess a broad knowledge of insurance, finance, securities, and taxes so that planners may properly provide service.  Most planners come from the insurance and securities business and may earn both a fee for planning and commissions from the sale of securities or insurance products to the client.

Washington State's securities laws define an investment adviser as any person who advises, for compensation, on the value of securities or the advisability of investing in, purchasing or selling securities.  Financial planning or financial planners are not specifically referred to in the state securities laws and are not explicitly made subject to those laws.  The business of financial planning often involves activity very similar, if not identical, to that engaged in by investment advisers.

SUMMARY:

The Securities Act of Washington is amended to include financial planners under the definition of investment adviser.  The definition is changed to include financial planners or any person who, as an integral component of providing financial related services, provides investment advice to others for compensation.  It also applies to those who hold themselves out as providing investment advisory services for compensation or hold themselves out as financial planners.

The exemption from the definition of investment adviser pertaining to accountants whose performance of investment adviser services is solely incidental to their practice is expanded.  Certified public accountants are added to the exemption pertaining to accountants.

Radio or television stations are made totally exempt from the definition of investment adviser.

It is a violation of the law to hold oneself out as a financial planner, investment counselor or other similar term unless registered as an investment adviser or investment adviser salesperson.  Other similar terms may be specified in rules adopted by the director of the Securities Division.

VOTES ON FINAL PASSAGE:

     Senate   44    2

     House 94  3 (House amended)

     Senate          (Senate refused to concur)

     House 97  0 (House receded)

EFFECTIVE:July 23, 1989