Monday, July 18, 2011

West Virginia Mandates IA Code of Ethics and Revises IA Solicitor/IA Solicitor Rep. Order

Code of Ethics. Investment advisers registered or required to register in West Virginia must have adopted and submitted to the West Virginia Securities Commission by July 1, 2011, a written Code of Ethics, requiring among other things, that: (1) investment advisers review the personal securities transactions and holdings of their investment adviser representatives at least annually; and (2) that investment adviser representatives and other employees report any Code of Ethics violations to the Chief Compliance Officer or other principal or responsible person.

Investment Adviser Solicitors and Solicitor Representatives. This administrative order superseding an earlier one from 1999 reclassifies a "Limited Capacity Investment Adviser" as an "Investment Adviser Solicitor," exempting the person who falls within the "investment Adviser Solicitor" definition from filing Form ADV, Part 2, or from complying with the IA net worth requirements, but mandating the Solicitors to comply with all other investment adviser requirements. A business referral arrangement including fee or commission agreements between Investment Adviser Solicitors and the persons or entities on whose behalf they refer clients must be provided to the Commissioner within five days of the arrangement's adoption (disclosing prescribed information as stated in the administrative order). Investment Adviser Solicitors must file with the Commissioner any change in a business referral arrangement, within 30 days of adoption of a change.

An "investment adviser solicitor representative" as defined in this administrative order must be registered or qualified to engage in the securities business in the State of his or her principal place of business, and may only solicit, offer or negotiate for the sale of investment advisory services, engaging in no other investment adviser representative activity. The West Virginia Securities Commissioner will consider a specified written request by the solicitor representative registration applicant to waive the testing requirement but only after the applicant submits the pertinent application forms and fees. The waiver, effective until December 31, will be granted for applicants appearing otherwise qualified to transact business in West Virginia where investor protection is not a factor persuading the Commissioner to require a written exam.

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