CHAPTER 104
HB 889-FN – FINAL VERSION
27Mar2007… 0783h
16May2007… 1708eba
2007 SESSION
08/03
HOUSE BILL 889-FN
This bill:
I. Modifies requirements for broker-dealers and investment advisors.
II. Requires broker-dealers and investment advisors to establish supervisory procedures.
III. Requires notice filing for otherwise exempt offerings filed as covered securities.
IV. Allows the secretary of state to appoint multiple deputy secretaries of state.
V. Exempts “solicitors,” as defined in the bill, from examination requirements.
This bill was requested by the department of state.
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Explanation: Matter added to current law appears in bold italics.
Matter removed from current law appears [in brackets and struckthrough.]
Matter which is either (a) all new or (b) repealed and reenacted appears in regular type.
27Mar2007… 0783h
16May2007… 1708eba
07-0925
08/03
STATE OF NEW HAMPSHIRE
In the Year of Our Lord Two Thousand Seven
AN ACT relative to securities regulation.
Be it Enacted by the Senate and House of Representatives in General Court convened:
104:1 Post Licensing Provisions; Examinations. RSA 421-B:9, I is repealed and reenacted to read as follows:
I. The records of a broker-dealer licensed or required to be licensed under this chapter, of an investment adviser registered or required to be registered under this chapter, and of an issuer-dealer licensed or required to be licensed under this chapter are subject to such reasonable periodic, special, or other audits or inspections by a representative of the secretary of state, within or without this state, as the secretary of state considers necessary or appropriate in the public interest and for the protection of investors. An audit or inspection may be made at any time and without prior notice. The secretary of state may copy, and remove for audit or inspection, copies of all records the secretary of state reasonably considers necessary or appropriate to conduct the audit or inspection.
104:2 Holding Out Names of Branch Offices. Amend RSA 421-B:6, V(b)-(c) to read as follows:
(b)(1) It is prohibited for any branch office or agent of a broker-dealer or investment adviser to conduct a securities or investment advisory business in this state under any name other than that of the broker-dealer or investment adviser with which the branch office is associated or agent is licensed.
(2) If more than one business enterprise is conducted from a branch office location, disclosures shall clearly set forth the name of each business enterprise, what business activity is conducted by each organization, and each licensed agent’s relationship to each organization; provided, however, that this requirement shall not apply to television, radio, or billboard advertising that pertains exclusively to a non-securities product.
(c)(1) Each broker-dealer branch office within this state shall be supervised by a manager who is [located in a New Hampshire office of the broker-dealer] a licensed agent in New Hampshire and who shall have qualified as a principal by passing [either the] a National Association of Securities Dealers [Series 8 (now 9 and 10) examination(s) or a] principal’s examination applicable to the licensee’s business conducted at that location. [Administration of examinations shall be conducted by the National Association of Securities Dealers. Each broker-dealer branch office within this state that is not supervised by an on-site manager who shall have qualified as a principal shall disclose in any telephone directory listing, business card, or letterhead the address and telephone number of the New Hampshire office of the broker-dealer from which individuals conducting business from such location are directly supervised.]
(2) Each broker-dealer and investment adviser shall establish and maintain supervisory procedures that are reasonably designed to achieve compliance with all applicable securities laws and statutes. The responsibility for such supervisory procedure shall be determined by various factors, including but not limited to:
(A) The firm’s size, organizational structure, and scope of business activities, and the number and location of offices.
(B) The nature and complexity of procedures and services offered.
(C) The volume of business conducted.
(D) The number of agents and investment advisors assigned to a location.
(E) Whether a location has an on-site principal.
(F) Whether the office is a non-branch location.
(G) The disciplinary history of its agents and investment adviser representatives.
104:3 Branch Office; Definition. RSA 421-B:2, IV-a is repealed and reenacted to read as follows:
IV-a.(a) “Branch office” means:
(1) With regard to an investment adviser, any location other than the main office, identified by any means to broker-dealers or other investment advisers or to the public, customers, or clients as a location at which an investment adviser conducts an investment advisory business.
(2) With regard to a broker-dealer, any location where one or more agents, as defined in paragraph II, regularly conducts the business of effecting any transactions in, or inducing or attempting to induce the purchase or sale of, any security, or is held out as such, excluding:
(A) Any location that is established solely for customer service and/or back-office-type functions where no sales activities are conducted and that is not held out to the public as a branch office;
(B) Any location that is the agent’s primary residence; provided that:
(i) Only one agent, or multiple agents who reside at that location and are members of the same immediate family, conduct business at the location;
(ii) The location is not held out to the public as an office and the agent does not meet with customers at the location;
(iii) Neither customer funds nor securities are handled at that location;
(iv) The agent is assigned to a designated branch office, and such designated branch office is reflected on all business cards, stationery, advertisements, and other communications to the public by such agent;
(v) The agent’s correspondence and communications with the public are subject to the broker-dealer’s supervision;
(vi) Electronic communications, such as e-mail are made through the electronic system of the broker-dealer;
(vii) All orders for securities are entered through the designated branch office or an electronic system established by the broker-dealer that is reviewable at the branch office;
(viii) Written supervisory procedures pertaining to supervision of activities conducted at the residence are maintained by the broker-dealer; and
(ix) A list of the residence locations are maintained by the broker-dealer;
(C) Any location, other than a primary residence, that is used for securities business for less than 30 business days in any one calendar year, provided the broker-dealer complies with the provisions of IV-a (a)(2)(B)(ii) through (viii);
(D) Any office of convenience, where associated persons occasionally and
exclusively by appointment meet with customers, which is not held out to the public as an office;
(E) Any location that is used primarily to engage in non-securities activities and from which the agent effects no more than 25 securities transactions in any one calendar year; provided that any advertisement or sales literature identifying such location also sets forth the address and telephone number of the location from which the agent conducting business at the non-branch locations is directly supervised;
(F) The floor of a registered national securities exchange where a broker-dealer conducts a direct access business with public customers;
(G) A temporary location established in response to the implementation of a business continuity plan; or
(H) Any other location not within the intent of this paragraph as the secretary of state may determine.
(b) Notwithstanding the exclusions provided in subparagraph IV-a(a)(2), any location that is responsible for supervising the activities of agents of the broker dealer at one or more non-branch locations of the broker-dealer shall be a branch office.
(c) “Business day” as used in this paragraph shall not include any partial day provided that the agent or investment adviser representative spends at least 4 hours of such day at his or her designated branch office during the hours that such office is normally open for business.
104:4 Notice Filing Requirement. Amend RSA 421-B:11, I-a(e) to read as follows:
(e)(1) No later than 15 days after the first sale in this state of covered securities under section 18(b)(4)(D) of the Securities Act of 1933, a notice shall be filed which includes:
[(1)] (A) The name, address, and telephone number of the issuer and the type of securities to be sold;
[(2)] (B) A consent to service of process on Form U-2 signed by the issuer;
[(3)] (C) A complete Form D, including pages 1-8, filed with the Securities and Exchange Commission;
[(4)] (D) The name of any registered broker-dealer who will effect transactions in this state;
[(5)] (E) The fee pursuant to RSA 421-B:31, I(h); and
[(6)] (F) A statement indicating the date on which the first sale in this state of covered securities under section 18(b)(4)(D) of the Securities Act of 1933 occurred.
(2) Notwithstanding the exemption in RSA 421-B:17, II(a)(2) and the exclusions from the computation of sales in RSA 421-B:17, II(a)(3), any offering filed as a covered security under section 18(b)(4)(D) of the Securities Act of 1933 with the United States Securities and Exchange Commission or any other state must be notice filed in this state pursuant to RSA 421-B:11, I-a(e)(1).
104:5 Administration; Secretary of State. Amend RSA 421-B:21, I to read as follows:
I. This chapter shall be administered by the secretary of state who may appoint [a] deputy [secretary] secretaries of state or [designee] designees who shall serve as director and who may be [a] classified or [an] unclassified [employee] employees whose salary shall be that of or comparable to that of a deputy secretary of state, to administer the provisions of this chapter. The secretary of state may also appoint deputy directors who shall perform such duties as may be assigned by the secretary of state, deputy secretary of state, or designee, or director, to administer the provisions of this chapter. The secretary of state shall, to the greatest extent practical, physically and substantively consolidate the activities and functions related to corporations, limited partnerships, and other business organizations and entities administered by the department of state with the activities and functions related to the registration of securities.
104:6 New Paragraph; Solicitor; Definition. Amend RSA 421-B:2 by inserting after paragraph XX-a the following new paragraph:
XX-b. “Solicitor” means an investment adviser, investment adviser agent, or investment adviser representative that:
(a) Is licensed under this chapter ;
(b) Conducts an investment advisory business solely for the purpose of soliciting, directly or indirectly, any client for, or referring any client to, an investment adviser licensed under this chapter;
(c) Receives a cash fee for such solicitation or referral; and
(d) Operates pursuant to a written agreement with the investment adviser that:
(1) Describes the solicitation activities to be engaged in on behalf of the investment adviser and the compensation to be received therefor;
(2) Contains an undertaking to perform the duties under the agreement in a manner consistent with the instructions of the investment adviser and the provisions of this chapter; and
(3) Requires, at the time of any solicitation activities for which compensation is paid or to be paid by the investment adviser, that the client be provided with a current copy of the investment adviser’s written disclosure statement that describes the solicitation arrangement.
104:7 Examination Requirements; Exceptions. Amend RSA 421-B:7, VII(d) to read as follows:
(d)(1) The examination requirement shall not apply to an individual who upon application holds one of the following professional designations:
[(1)] (A) Certified Financial Planner (CFP) awarded by the Certified Financial Planner Board of Standards, Inc.;
[(2)] (B) Chartered Financial Consultant (ChFC) awarded by the American College, Bryn Mawr, Pennsylvania;
[(3)] (C) Personal Financial Specialist (PFS) awarded by the American Institute of Certified Public Accountants;
[(4)] (D) Chartered Financial Analyst (CFA) awarded by the Institute of Chartered Financial Analysts;
[(5)] (E) Chartered Investment Counselor (CIC) awarded by the Investment Counsel Association of America, Inc.; or
[(6)] (F) Such other professional designation as the secretary of state may by rule or order recognize.
(2) The examination requirements shall not apply to a solicitor that submits an application to the secretary of state containing:
(A) A request for a waiver of the examination requirements;
(B) A copy of the solicitation agreement described in RSA 421-B:2, XX-b(d);
(C) A copy of the disclosure document of the investment adviser on whose behalf the solicitor solicits or refers clients disclosing the arrangements between the solicitor and the investment adviser; and
(D) An undertaking that, prior to, or at the time of, entering into any investment advisory contract with a client, the investment adviser will obtain from such client a signed and dated acknowledgment of receipt of the investment adviser’s written disclosure statement and acknowledgment that the investment advisory contract is being entered into pursuant to a solicitation arrangement with the solicitor as described in the investment adviser’s written disclosure statement.
104:8 Repeal. RSA 421-B:8, XIV(b), relative to the filing of balance sheets by licensed investment advisers who have discretionary authority over client funds, but not custody, is repealed.
104:9 Effective Date. This act shall take effect July 1, 2007.
Approved: June 11, 2007
Effective: July 1, 2007