Subject of Possible Rule Making: Revisions to chapter 460-24A WAC to implement a mandatory electronic filing for investment advisers and investment adviser representatives using the Investment Adviser Registration Depository (IARD).

Statutes Authorizing the Agency to Adopt Rules on this Subject: RCW 21.20.050, 21.20.450.

Reasons Why Rules on this Subject may be Needed and What They Might Accomplish: The anticipated advantages of IARD include the following:

     1. The IARD will be an Internet-based system that advisers will access through computers in their offices without the need for specialized hardware or software. An adviser will be able to use the system to apply, amend and/or withdraw its registration.

     2. The IARD will contain a number of features designed to make it easy for persons to complete Form ADV, even if they are unfamiliar with the form. The form will be completed on-line and will include a glossary and a help function. The system will not allow the submission of an incomplete form and will check for inconsistent information. The system, however, will allow the user to save a draft version of the form to allow the user to fill out the form over several sessions.

     3. For firms registered as both broker-dealers and investment advisers, the IARD and CRD systems will be linked so that responses common to both IARD and CRD need be entered only once.

     4. Current information submitted to the IARD by advisers will be available to the public through the IARD web site without charge. Interested persons will be able to search the database to retrieve information, including disciplinary records, about advisory firms and their representatives.

     Filing Fees. IARD is permitted to charge reasonable fees to cover system costs. The anticipated fee schedule for state registered advisers and their representatives is as follows:

     1. Investment Adviser:

     (a) Initial Filing - $150

     (b) Annual Renewal - $100

     2. Investment Adviser Representative:

     (a) Initial Filing - $45

     (b) Annual Renewal - $45

     (c) Transfer - $45

     Please note that these fees would be in addition to the licensing fees collected by the Securities Division. Thus, an adviser filing its annual renewal would owe $175 - $75 for the licensing renewal fee due to the Washington State Treasurer and $100 for the IARD filing fee. All fees would be automatically calculated by IARD. State licensing fees will be electronically remitted to the states by the IARD system.

     Hardship Exemptions. The model rules provide two hardship exemptions from the requirements to make electronic filings:

     1. A temporary exemption is granted for those advisers that experience unanticipated technical difficulties;

     2. A continuing hardship exemption is available if the adviser is able to demonstrate that the electronic filing requirements are unduly burdensome.

Other Federal and State Agencies that Regulate this Subject and the Process Coordinating the Rule with These Agencies: The Securities and Exchange Commission (SEC) regulates federally registered investment advisers. The SEC is proposing to make electronic filing on IARD mandatory for its registrants as well. (The proposing release can be found at http://www.sec.gov/rules/proposed/34-42620.htm.) In response, the North American Securities Administrators Association (NASAA) has drafted model rules, which are currently out for public comment, for use by states in adopting IARD. (The model rules can be found at http://www.nasaa.org/bluesky/proposals/IARDModelRules.pdf.) Any amendments proposed as part of this rule making are intended [to] coordinate with the SEC and NASAA proposals.

Process for Developing New Rule: It is intended that any rules adopted pursuant to this process will be consistent with the NASAA Model Rules discussed above, which are subject to public comment until August 21, 2000. The Securities Division will also solicit the comment of currently registered investment advisers and their representatives and other interested parties.

Interested parties can participate in the decision to adopt the new rule and formulation of the proposed rule before publication by contacting William M. Beatty, Securities Division, Department of Financial Institutions, P.O. Box 9033, Olympia, WA 98507-9033, (360) 902-8760, fax (360) 704-6923, bbeatty@dfi.wa.gov, Securities Division Web Site http://www.wa.gov/dfi/securities.

August 3, 2000

Deborah Bortner

Securities Administrator

© Washington State Code Reviser's Office