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Law360 (April 6, 2020, 6:33 PM EDT ) New York Attorney General Letitia James said Monday that her office was moving forward with a rule proposal aimed at streamlining registration requirements for companies in the state's securities industry.
Coming amid her office's broader response to the novel coronavirus pandemic, James' proposed rule would move the filing and payments process for the AG office's Investor Protection Bureau over to standardized federal and multi-state systems, with the hope of clearing up industry confusion about certain registration requirements and enhancing the tracking of compliance.
"While these new rules are part of a long-term review of our internal practices, the spread of the coronavirus over the past several weeks further magnify why these changes are so critical," James said in an announcement. "The proliferation of scams and frauds related to COVID-19 make it more important than ever for New Yorkers to know who they are dealing with, and these rules will do exactly that by expanding the registration and tracking of individual investment advisers."
Among the proposed revisions is an amendment requiring certain notices for federal "covered securities" being sold in New York to be filed through the North American Association of Securities Administrators' electronic filing system. Investment adviser representatives, meanwhile, will be registered through the federally-operated Central Registration Depository/Investment Adviser Registration Depository.
According to James' announcement, this should close gaps in nationwide regulatory efforts that were previously susceptible to failures in connecting investment advisers to their past records within the securities industry.
A thorough accounting of an adviser's record is necessary to protect the investing public, James said, adding that the revisions will also delineate her office's authority to deny, suspend, condition, or revoke any investment adviser's registration statement or application for good cause.
The proposed revisions would also institute a new bookkeeping rule for investment advisers registered with the state, requiring them to take reasonable steps to verify the "accredited investor" and "qualified client" statuses of their customers, and also sets up registration requirements for previously undefined subclasses of broker-dealers and advisers who match investors with securities industry participants, now-classified under the proposed rule as "finders" and "solicitors."
"By moving to standardized electronic filings and payments, our systems will be more resilient to disruption in the future," James said Monday. "Ultimately, these rule changes will increase our use of technology, clean up decades of industry confusion, and enhance our ability to prevent exploitation of New Yorkers in the investment industry."
--Editing by Emily Kokoll.
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