PREPROPOSAL STATEMENT OF INQUIRY
Subject of Possible Rule Making: The Securities Division proposes to amend WAC 460-24A-105, concerning requirements imposed on investment advisers who take custody of client funds or securities.
Statutes Authorizing the Agency to Adopt Rules on this Subject: RCW 21.20.450, 21.20.100, 21.20.050-[21.20.]060.
Reasons Why Rules on this Subject may be Needed and What They Might Accomplish: The Securities Division proposes to amend WAC 460-24A-105, addressing investment advisers who take custody of client funds. In general, the amendment would require investment advisors to indicate in their registration application whether they take custody of client funds, require investment advisors to keep such funds with a qualified custodian, and define certain key terms such as "custody." The rule would also update and make more uniform the language in the current rule. The division believes that these amendments will increase investor protection by improving the information given to the division and to clients, while giving the securities industry more structured guidance about safekeeping client funds and the meaning of "custody."
Other Federal and State Agencies that Regulate this Subject and the Process Coordinating the Rule with These Agencies: This proposal is intended to be consistent with the North American Securities Administrators Association (NASAA) model rule on custody requirements for investment advisers.
Process for Developing New Rule: The NASAA model rule upon which this amendment will be based was subjected to extensive public comment prior to adoption.
Interested parties can participate in the decision to adopt the new rule and formulation of the proposed rule before publication by contacting Andrew Ledbetter, Securities Division, Department of Financial Institutions, P.O. Box 9033, Olympia, WA 98507-9033, (360) 902-8760, fax (360) 704-6923, email@example.com. Information is also available on the Securities Division website http://www.dfi.wa.gov/sd.
January 5, 2005
Helen P. Howell