New York Rule Modernization Proposal

We have learned of a potentially major change for New York state and federally covered investment advisers. The New York Department of Law is proposing to revise and modernize the rules within Title 13 NYCRR Part 11 to achieve a coordination of registration and notice filing requirements with other states.

If the rule change proposal is adopted, it will have significant impact to investment advisory firms with respect to individuals acting in the capacity of investment adviser representatives, firm principals and solicitors. Specifically, the definitions of an investment adviser representative, solicitor and principal would be added, and registration would be officially mandated for these securities industry persons. An “investment adviser representative” would be a natural person who represents an investment adviser, solicitor or federal covered investment adviser when performing any act that defines an investment adviser under NY’s General Business Law. An investment adviser representative would also include a natural person who performs acts for a federal covered investment adviser, unless the natural person represents a federal covered investment adviser and does not have a place of business in New York. Any natural person supervising any investment adviser representative would be deemed to be an investment adviser representative subject to New York’s investment adviser representative registration and the written examination requirement. So, in short, New York would now require U4 filings for investment adviser representatives with a place of business in New York!

The CRD system will be utilized for the registration process to include submission of the applicable registration fee and the validation of registration qualification. At the current time, we do not have information about the timing and requirements for compliance with the rule changes, if adopted.

Other revisions are included in the proposal for investment advisers relating to recordkeeping requirements for the verification of an “accredited investor” or “qualified client.”

The public comment period for the proposal closes on June 14, 2020. We will monitor the progress and provide updates as they become available. Please reach out to us if you have any questions on the potential rule changes:

The full text of the proposed revisions to the regulations, including those for broker-dealers, can be found here. 

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