ARM 2016 Annual Educational Conference NASAA Panel: State Issues - - PowerPoint PPT Presentation

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ARM 2016 Annual Educational Conference NASAA Panel: State Issues - - PowerPoint PPT Presentation

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ARM 2016 Annual Educational Conference NASAA Panel: State Issues Amelia Island, Florida March 8, 2016 WWW.NASAA.ORG | 202 737 0900 | 750 FIRST ST NE STE 1140 WASHINGTON, DC 20002 This information provided herein is for your

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WWW.NASAA.ORG | 202 737 0900 | 750 FIRST ST NE STE 1140 WASHINGTON, DC 20002 This information provided herein is for your convenience only, is illustrative, and is not intended as legal advice.

ARM 2016 Annual Educational Conference

NASAA Panel: State Issues Amelia Island, Florida March 8, 2016

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WWW.NASAA.ORG | 202 737 0900 | 750 FIRST ST NE STE 1140 WASHINGTON, DC 20002 This information provided herein is for your convenience only, is illustrative, and is not intended as legal advice.

Panel

Andrew Hartnett Missouri Commissioner of Securities Melanie Lubin Maryland Securities Commissioner Pam Epting Deputy Commissioner Florida Office of Financial Regulation A.Valerie Mirko General Counsel, NASAA Moderator Michele M. Van Tassel Credit Suisse

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WWW.NASAA.ORG | 202 737 0900 | 750 FIRST ST NE STE 1140 WASHINGTON, DC 20002 This information provided herein is for your convenience only, is illustrative, and is not intended as legal advice.

Today’s Agenda

  • NASAA Policy Priorities:
  • Senior Initiatives.
  • Broker-Dealer Section Initiatives.
  • Expungement update.
  • Update on CRD, state processes and

trends.

  • Update on state legislation and rules.
  • State enforcement efforts.
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WWW.NASAA.ORG | 202 737 0900 | 750 FIRST ST NE STE 1140 WASHINGTON, DC 20002 This information provided herein is for your convenience only, is illustrative, and is not intended as legal advice.

NASAA Policy Priorities

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WWW.NASAA.ORG | 202 737 0900 | 750 FIRST ST NE STE 1140 WASHINGTON, DC 20002 This information provided herein is for your convenience only, is illustrative, and is not intended as legal advice.

Senior Initiatives

  • NASAA Model Act to Protect Vulnerable

Adults (adopted Jan. 2016).

  • Advocacy at federal level.
  • Best practices:
  • Training on handling the elderly.
  • Detection.
  • Prevention.
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WWW.NASAA.ORG | 202 737 0900 | 750 FIRST ST NE STE 1140 WASHINGTON, DC 20002 This information provided herein is for your convenience only, is illustrative, and is not intended as legal advice.

Broker-Dealer Section Initiatives

  • Broker Dealer Coordinated Examinations:
  • Designed to find out what policies and

procedures firms have in place related to senior investors.

  • May include requests related to multiple areas
  • f a firm’s business, including sales,

marketing, communications, and training.

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WWW.NASAA.ORG | 202 737 0900 | 750 FIRST ST NE STE 1140 WASHINGTON, DC 20002 This information provided herein is for your convenience only, is illustrative, and is not intended as legal advice.

Broker-Dealer Section Initiatives

  • Broker Dealer Fee Disclosure Working Group:
  • Industry/Regulator Working Group formed to try to

increase the accessibility, understandability, and comparability of miscellaneous fees.

  • On September 28, 2015, the Working Group released its

report;

  • Report includes a model fee disclosure template as well

as access guidelines.

  • Ideally, the fee schedule should be available on the

firm’s website (without requiring a log-on or password).

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WWW.NASAA.ORG | 202 737 0900 | 750 FIRST ST NE STE 1140 WASHINGTON, DC 20002 This information provided herein is for your convenience only, is illustrative, and is not intended as legal advice.

UPDATE ON CRD, STATE PROCESSES AND TRENDS

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WWW.NASAA.ORG | 202 737 0900 | 750 FIRST ST NE STE 1140 WASHINGTON, DC 20002 This information provided herein is for your convenience only, is illustrative, and is not intended as legal advice.

CRD Update

  • Fingerprint functionality enhancements will be made in CRD in Q2,

2016.

  • For states with a statutory requirement to collect fingerprints with a

registration, CRD functionality will permit the state to retain a form filing in a “Deficient for Fingerprints” status until such time as a Clear FBI result is posted in CRD.

  • The functionality will be applicable with an Initial, Amendment, or

Dual filing.

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WWW.NASAA.ORG | 202 737 0900 | 750 FIRST ST NE STE 1140 WASHINGTON, DC 20002 This information provided herein is for your convenience only, is illustrative, and is not intended as legal advice.

CRD Update

  • If FBI results clear, representative will auto approve in jurisdictions

that allow auto approval.

  • If FBI results contain RAPP, the individual will be set to Pending

and sent to the manual approval queue for further review.

  • Fingerprint functionality will require system setting changes by
  • states. Preliminarily, at least six (6) states have indicated that they

have this authority pursuant to their statutes and regulations. At this time impact to state business processes is unknown.

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WWW.NASAA.ORG | 202 737 0900 | 750 FIRST ST NE STE 1140 WASHINGTON, DC 20002 This information provided herein is for your convenience only, is illustrative, and is not intended as legal advice.

Forms Update

  • NASAA CRD/IARD Steering & Forms and Process

Committees are drafting possible U4/U5 amendments for future adoption.

  • Ongoing collaboration with FINRA.
  • Recommendations for changes are being evaluated by the

regulatory and industry communities.

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WWW.NASAA.ORG | 202 737 0900 | 750 FIRST ST NE STE 1140 WASHINGTON, DC 20002 This information provided herein is for your convenience only, is illustrative, and is not intended as legal advice.

Update on State Processes and Trends

  • Florida registration staff continues to observe scenarios

where an IAR has conducted business requiring registration from a “place of business” within the jurisdiction without the appropriate registration.

  • Common scenarios include:
  • Relocation to a new state.
  • A second residential address in a state other than the home

state.

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WWW.NASAA.ORG | 202 737 0900 | 750 FIRST ST NE STE 1140 WASHINGTON, DC 20002 This information provided herein is for your convenience only, is illustrative, and is not intended as legal advice.

UPDATE ON STATE LEGISLATION & RULES

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WWW.NASAA.ORG | 202 737 0900 | 750 FIRST ST NE STE 1140 WASHINGTON, DC 20002 This information provided herein is for your convenience only, is illustrative, and is not intended as legal advice.

Update: Legislation & Rules*

South Carolina – adopted regulations effective June 26, 2015 that:

  • Permit IARs to register with multiple advisers.
  • Require IARs who have not been registered for 2+ years to

re-take Series 65, or 7 and 66.

  • Clarify that South Carolina IAs with custody must follow

Rule 206(4)-2 of Advisers Act.

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WWW.NASAA.ORG | 202 737 0900 | 750 FIRST ST NE STE 1140 WASHINGTON, DC 20002 This information provided herein is for your convenience only, is illustrative, and is not intended as legal advice.

Update: Legislation & Rules

Minnesota – proposing legislation to address financial exploitation of senior citizens and vulnerable adults. Utah – proposing legislation to:

  • Clarify conduct considered to be in violation of Utah law.
  • Add language to apply factors currently allowed when determining

fines and penalties.

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WWW.NASAA.ORG | 202 737 0900 | 750 FIRST ST NE STE 1140 WASHINGTON, DC 20002 This information provided herein is for your convenience only, is illustrative, and is not intended as legal advice.

Update: Legislation & Rules

Ohio – adopted legislation that:

  • Permits a BD firm to conduct business without a license, as

long as the transactions are solely with institutional investors, the firm has no place of business in Ohio and the firm is licensed with the SEC (Effective 9-2015).

  • Amended its definition of institutional investor, to the model

Uniform Act definition (2002 version), raising the threshold to be an “institutional investor” (Effective 9-2015).

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WWW.NASAA.ORG | 202 737 0900 | 750 FIRST ST NE STE 1140 WASHINGTON, DC 20002 This information provided herein is for your convenience only, is illustrative, and is not intended as legal advice.

Update: Legislation & Rules

New Hampshire – adopted

  • An exemption from broker-dealer registration for “a bona fide

preexisting customer whose principal place of residence is not in this state and the person is registered as a broker-dealer under the Securities Exchange Act of 1934 or not required to registered under the Securities Exchange Act of 1934 and is registered under the securities act of the state in which the customer maintains a principal place of residence.”

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WWW.NASAA.ORG | 202 737 0900 | 750 FIRST ST NE STE 1140 WASHINGTON, DC 20002 This information provided herein is for your convenience only, is illustrative, and is not intended as legal advice.

Update: Legislation & Rules

Wyoming – adopted legislation to create a state registration requirement for investment advisers. Florida – proposed legislation to create an exemption for merger and acquisition brokers. Proposed exemption closely follows the NASAA Model Rule Exempting Certain Merger & Acquisition Brokers (“M&A Brokers”) from Registration.

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WWW.NASAA.ORG | 202 737 0900 | 750 FIRST ST NE STE 1140 WASHINGTON, DC 20002 This information provided herein is for your convenience only, is illustrative, and is not intended as legal advice.

Update: Legislation & Rules

Louisiana – Legislation passed in 2014 to require:

  • IARs of federally-covered advisers to meet state

examination/certification requirements by 8/31/16 in order to maintain registration.

  • At present, Louisiana will accept the following testing and

certifications to meet this requirement (also, see next slide) –

  • Evidence of passage of a post-2000 Series 65.
  • Evidence of passage of a Series 66 in combination with a

Series 7.

  • Evidence of an allowable professional designation.
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WWW.NASAA.ORG | 202 737 0900 | 750 FIRST ST NE STE 1140 WASHINGTON, DC 20002 This information provided herein is for your convenience only, is illustrative, and is not intended as legal advice.

Update: Legislation & Rules

Louisiana –

  • Intends to propose a rule (with an anticipated effective date

prior to 8/31/2016) which would allow the addition of the following testing criteria to meet the registration requirement

  • Evidence of passage of a pre-2000 Series 65 if the

representative also has passed the Series 7.

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WWW.NASAA.ORG | 202 737 0900 | 750 FIRST ST NE STE 1140 WASHINGTON, DC 20002 This information provided herein is for your convenience only, is illustrative, and is not intended as legal advice.

Update: Legislation & Rules

Florida – reorganized its administrative rules related to registration. The rules are now organized by license type.

  • The changes provide requirements for the application/notice filing

process, maintenance of the registration/notice filing, and the termination of the registration/notice filing for each type of filing processed by the Division of Securities.

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WWW.NASAA.ORG | 202 737 0900 | 750 FIRST ST NE STE 1140 WASHINGTON, DC 20002 This information provided herein is for your convenience only, is illustrative, and is not intended as legal advice.

Expungement Update

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WWW.NASAA.ORG | 202 737 0900 | 750 FIRST ST NE STE 1140 WASHINGTON, DC 20002 This information provided herein is for your convenience only, is illustrative, and is not intended as legal advice.

Combined Rule 2080 Waiver Requests & Litigations

138 110 182 398 517 646 478 413 62 100 200 300 400 500 600 700 2008 2009 2010 2011 2012 2013 2014 2015 2016 YTD

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WWW.NASAA.ORG | 202 737 0900 | 750 FIRST ST NE STE 1140 WASHINGTON, DC 20002 This information provided herein is for your convenience only, is illustrative, and is not intended as legal advice.

Rule 2080 Waiver Requests

100 93 157 374 471 589 418 358 55 100 200 300 400 500 600 2008 2009 2010 2011 2012 2013 2014 2015 2016 YTD

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WWW.NASAA.ORG | 202 737 0900 | 750 FIRST ST NE STE 1140 WASHINGTON, DC 20002 This information provided herein is for your convenience only, is illustrative, and is not intended as legal advice.

Rule 2080-Related Litigation (No Prior Waiver Request)

38 17 25 24 46 57 60 55 7 10 20 30 40 50 60 2008 2009 2010 2011 2012 2013 2014 2015 2016 YTD

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WWW.NASAA.ORG | 202 737 0900 | 750 FIRST ST NE STE 1140 WASHINGTON, DC 20002 This information provided herein is for your convenience only, is illustrative, and is not intended as legal advice.

Expungement Policy: State of Play

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WWW.NASAA.ORG | 202 737 0900 | 750 FIRST ST NE STE 1140 WASHINGTON, DC 20002 This information provided herein is for your convenience only, is illustrative, and is not intended as legal advice.

NASAA Series 63, 65, & 66 Examinations

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WWW.NASAA.ORG | 202 737 0900 | 750 FIRST ST NE STE 1140 WASHINGTON, DC 20002 This information provided herein is for your convenience only, is illustrative, and is not intended as legal advice.

Test Specifications & Scoring

  • Year-long review including feedback from >1000 industry

participants and regulators.

  • Test specifications updated for Series 63, 65 and 66 exams but

update includes no dramatic shifts in content.

  • Scoring change: Series 66 will require 73/100.
  • No scoring changes to Series 63 and 65.
  • NASAA will implement these new specifications and scoring

changes on July 1, 2016.

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WWW.NASAA.ORG | 202 737 0900 | 750 FIRST ST NE STE 1140 WASHINGTON, DC 20002 This information provided herein is for your convenience only, is illustrative, and is not intended as legal advice.

Exam Changes: NASAA Series 63

  • Two new topic areas added:
  • Advertising and correspondence, including social media.
  • Cybersecurity and data protection.
  • The number of items on the Series 63 remains unchanged, as does

the passing score.

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WWW.NASAA.ORG | 202 737 0900 | 750 FIRST ST NE STE 1140 WASHINGTON, DC 20002 This information provided herein is for your convenience only, is illustrative, and is not intended as legal advice.

Exam Changes: NASAA Series 65

  • New specifications emphasize the characteristics of different types
  • f investments, including pooled investment vehicles.
  • The section on alternative investments was also updated.
  • New areas were added to highlight the importance of advertising

and correspondence, including social media; cybersecurity and data protection; custody obligations; and antimoney laundering.

  • The number of items on the Series 65 remains unchanged, as does

the passing score.

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WWW.NASAA.ORG | 202 737 0900 | 750 FIRST ST NE STE 1140 WASHINGTON, DC 20002 This information provided herein is for your convenience only, is illustrative, and is not intended as legal advice.

Exam Changes: NASAA Series 66

  • Certain content areas on the Series 66 were renamed, combined, and/or reorganized to

increase clarity.

  • In other content areas, additional examples were added to clarify certain topics, e.g.

valuation methods of fixed income securities and equity securities.

  • Content regarding alternative investments: expanded to include additional investment

types, given changing market conditions; new areas regarding other assets were included.

  • The number of items remains unchanged.
  • Passing score: modified to better reflect the weighting of the examination and the number
  • f questions on each topic.
  • New passing score on the Series 66 is 73 correct out of 100.
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WWW.NASAA.ORG | 202 737 0900 | 750 FIRST ST NE STE 1140 WASHINGTON, DC 20002 This information provided herein is for your convenience only, is illustrative, and is not intended as legal advice.

Exam Changes

Please review the NASAA website for more information http://www.nasaa.org/industry-resources/exams/exam- change-announcement/

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WWW.NASAA.ORG | 202 737 0900 | 750 FIRST ST NE STE 1140 WASHINGTON, DC 20002 This information provided herein is for your convenience only, is illustrative, and is not intended as legal advice.

STATE ENFORCEMENT TRENDS

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WWW.NASAA.ORG | 202 737 0900 | 750 FIRST ST NE STE 1140 WASHINGTON, DC 20002 This information provided herein is for your convenience only, is illustrative, and is not intended as legal advice.

NASAA Investigations and Enforcement Actions

NASAA’s 2015 Enforcement Report (re: 2014 activities) reflected that:

  • Regulators received 11,340 complaints concerning investors.
  • Complaints resulted in 4,853 investigations.
  • Investigations resulted in 2,042 enforcement actions comprised of:
  • 1,634 administrative actions.
  • 271 criminal actions.
  • 137 civil actions.
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WWW.NASAA.ORG | 202 737 0900 | 750 FIRST ST NE STE 1140 WASHINGTON, DC 20002 This information provided herein is for your convenience only, is illustrative, and is not intended as legal advice.

NASAA Investigations and Enforcement Actions

NASAA’s 2015 Enforcement Report (re: 2014 activities) reflected that:

  • Over $405 million in restitution was ordered returned to investors.
  • States levied $174 million in fines and penalties.
  • NASAA member activities resulted in 1,629 years in prison

sentences and 503 years of probation.

  • NASAA member actions resulted in 3,585 licenses being

withdrawn, denied, revoked, suspended or conditioned.

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WWW.NASAA.ORG | 202 737 0900 | 750 FIRST ST NE STE 1140 WASHINGTON, DC 20002 This information provided herein is for your convenience only, is illustrative, and is not intended as legal advice.

Enforcement Concerns

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WWW.NASAA.ORG | 202 737 0900 | 750 FIRST ST NE STE 1140 WASHINGTON, DC 20002 This information provided herein is for your convenience only, is illustrative, and is not intended as legal advice.

Questions?