By Jay Fishman, J.D.
New York’s Attorney General Letitia James announced the adoption of final securities rules to modernize registration and filing with the Investor Protection Bureau (IPB). Once the changes are fully implemented, New York’s registration procedures will better conform to the federal securities registration regime, cure industry confusion over certain registration requirements, and better track exam requirement compliance and disciplinary procedures for thousands of investment advisers who provide advice to New Yorkers.
The adopted rules consist of the following two parts, each with different effective and implementation dates:
Part 10. The first set of changes are to Part 10 of Chapter 11, Title 13 of the New York Official Compilation of Codes, Rules and Regulations. These rule amendments move the required notice filings for federal "covered securities" being sold in New York to the Electronic Filing Depository (EFD). These filings must be filed on the North American Securities Administrators (NASAA) website beginning December 2, 2020, the effective date for this set of rules.
Part 11. The second set of changes are to Part 11 of the above-mentioned compilation of codes. For the first time in New York, and by way of authority under New York’s Securities Act of 1921 (the Martin Act), investment adviser representatives (IARs) will need to be registered in the state through the Central Registration Depository (CRD)/Investment Adviser Registration Depository (IARD). Starting February 1, 2021, IARs will be required to meet exam requirements and register with the IPB. But while the effective date is February 1, the implementation date is December 2, 2021, allowing IARs currently conducting business covered by the new regulations to continue to do so without an approved registration until that date (so long as certain criteria are met). Additionally, the amendments create a new exam special waiver category for people who have been serving as IARs for at least two years.
Attorney General James said "These new rules reflect years of hard work by this office to bring securities registration into the 21st century. By moving to standardized electronic filings and payments, our systems will be more resilient to disruption in the future and will be better equipped to protect investors from frauds, especially critical as we have seen an exponential rise in these types of scams as a result of COVID-19. It is more important than ever for New Yorkers to know who they are dealing with when making an investment, and these rules will do exactly that by expanding the registration and tracking of individual investment advisers. Ultimately, this action represents a significant step forward in our efforts to protect New York investors and oversee securities sales practices."