RIA Compliance Blog
The Georgia Commissioner of Securities has proposed twelve amendments to investment adviser and broker-dealer rules it promulgated late last year under the Georgia Uniform Securities Act. Although some of the amendments deal with housekeeping issues and typographical errors, several are substantive and of interest to industry participants and their counsel.
A proposed change to Rule 590-4-2-.03 would clarify that Rule 505 Form D filings under the Uniform Limited Offering Exemption must be made within 15 days after the first sale of securities in the state, rather than 15 days prior to the sale, as required by the rule as originally adopted.
The second proposed amendment applies to registration of securities by non-profit entities under Rule 590-4-2-.07, often used for so-called “church bonds.” Under the rule as originally adopted, the application of NASAA Statements of Policy relating to church bonds was permissive rather than mandatory: “The Statements of Policy … may be applied, as applicable, to the proposed offer or sale of a security …” and “may serve as the grounds for the disallowance of the exemption” provided by the Act. Under the amendment, the use of the NASAA Policies is now mandatory, the “may” having been replaced by “shall” in both cases.
Rule 590-4-2-.08, establishing the new “Invest Georgia Exemption” designed to make it easier for businesses conducting small intrastate offerings to raise limited capital, has been amended to clarify that it may be used solely by for-profit entities. For more information about the “Invest Georgia Exemption” please see our previous blog post, New “Invest Georgia Exemption” Helps Small Businesses Raise Capital.
Two amendments, to Rules 590-4-4-.01 and 590-4-4-.08, relating to investment adviser renewals, eliminate the seven-day grace period which has previously existed for year-end IARD filings. Although such filings have previously been considered to be on time if made by January 7 of the following year, they must now be actually made in December in order to be timely.
Four amendments clarify the universe of investment advisers to which several rules apply. As currently written, Rules 590-4-4-.09 and 590-4-4-.17, relating to licensing examinations and advisory contract contents, would apply to all entities meeting the definition of “investment adviser,” regardless of whether a registration requirement exists. Rules 590-4-4-.14 and 590-4-4-.15, relating to books and records requirements and supervision, would currently apply only to investment advisers who are actually registered. The proposed amendments clarify that all of these rules they apply equally to registered investment advisers and also to unregistered advisers required to be registered, but not to entities meeting the definition of investment adviser but who meet a registration exemption. The result of this change is to increase the number of violations potentially chargeable to improperly unregistered investment advisers, but to remove from the rules’ purview investment advisers who are not required to be registered. (This clarification also applies to investment adviser representatives for Rules 590-4-4-.09 and .17.)
Finally, a change to subsection 590-4-4-.14(m) of the Books and Records Rule clarifies that Georgia-registered advisers with custody of funds must keep only those records required by the Georgia custody rule (590-4-4-.20), rather than the SEC custody rule.
The comment period for the rule amendments ends on March 2, 2012.
Parker MacIntyre provides legal and compliance services to investment advisers, broker-dealers, registered representatives, hedge funds and issuers of securities, among others. Our regulatory practice group assists financial service providers with the complex issues that arise in the course of their businesses, including compliance with federal and state laws and rules.