NASAA Proposes Model Rule Regarding Solicitors for Registered Investment Advisors

September 08, 2009

The Investment Adviser Regulatory Policy and Review Project Group of the North American Securities Administrators Association (known as “NASAA” and essentially consisting of state securities regulators) recently solicited comments from the public on a proposed model rule regarding solicitors for registered investment advisors. The comment period ended in August and NASAA has not yet released a final version of the model rule. According to NASAA’s website, the model rule “is necessary and appropriate to facilitate the regulation of solicitor activity for the benefit of investors, to promote uniformity among the states and between states and federal rules, and to provide guidance to the industry.”

The proposed model rule for solicitor arrangements reaffirms the solicitor/investment advisor written agreement and client disclosure requirements that are already on the books in many states. But the proposed model rule goes further to make very clear that the solicitor must be licensed as an investment advisor representative. While most states require solicitors to license as investment advisor representatives, there is a high level of confusion within the industry regarding solicitor registration and qualifications. Currently, only about 10 states do not require solicitors to license as investment advisors so the model rule includes a provision exempting solicitors from the investment advisor representative licensing requirements for states that choose to do so. The model rule is designed to mirror Rule 206(4)-3 of the U.S. Securities and Exchange Commission (“SEC”) provisions for statutory disqualifications, written agreements and disclosures to clients.

NASAA’s proposed rules are being provided under the Uniform Securities Act of 1956 and under the Uniform Securities Act of 2002. Therefore it is important to note that just because NASAA adopts a new model rule, it does not mean every state will automatically adopt the rule. While many states strictly follow the Uniform Securities Act’s provisions for investment advisors, some do not. Also, the adoption of any new rule must be made by the individual state. For example, in some states the securities division is given more latitude to implement new rules while other states securities division may require specific authorization from the state legislature. You can read more about the proposed rule on the NASAA website.

To learn information about the regulatory requirements for investment advisor solicitor arrangements, you can purchase our webinar, “Establishing & Supervising Solicitor Arrangements,” recorded on August 19, 2009 and view on-demand for a purchase price of $59.95. During this webinar, our consultants review in detail the requirements of SEC Rule 206(4)-3, the registration requirements of certain states and best supervisory practices for an investment adviser utilizing solicitors.

Purchase this on-demand webinar, “Establishing & Supervising Solicitor Arrangements,” for $59.95 by clicking below.

Posted by Bryan Hill
Labels: Solicitors, Webinar