Current through Register Vol. 24-06, March 15, 2024
For purposes of this chapter:
(1)
"Advertisement" means any
business card, notice, circular, letter or other written communication
addressed to more than one person, or any notice or other announcement in any
publication or by electronic means, including online, or by radio or
television, which offers:
(a) Any analysis,
report, or publication concerning securities, or which is to be used in making
any determination as to when to buy or sell any security, or which security to
buy or sell;
(b) Any graph, chart,
formula or other device to be used in making any determination as to when to
buy or sell any security, or which security to buy or sell; or
(c) Any other investment advisory service
with regard to securities.
(2)
"Assignment" means any
direct or indirect transfer or hypothecation of an investment advisory contract
by the assignor or of a controlling block of the assignor's outstanding voting
securities by a security holder of the assignor; but if the investment adviser
is a partnership, no assignment of an investment advisory contract will be
deemed to result from the death or withdrawal of a minority of the members of
the investment adviser having only a minority interest in the business of the
investment adviser, or from the admission to the investment adviser of one or
more members who, after such admission, will be only a minority of the members
and will have only a minority interest in the business. An "assignment" does
not include a transaction which does not result in a change of actual control
or management of the investment adviser.
(3)
"Central Registration
Depository" or "CRD" means the electronic filing system
operated by FINRA for the registration of broker-dealers, broker-dealer
representatives, and investment adviser representatives.
(4)
"Chief compliance officer"
means a supervised person with the authority and resources to develop and
enforce the investment adviser's policies and procedures. The individual
designated to serve as chief compliance officer must be registered as an
investment adviser representative and must have the background and skills
appropriate for fulfilling the responsibilities of the position.
(5)
"Control" means the power,
directly or indirectly, to direct the management or policies of a person
whether through ownership of securities, by contract, or otherwise. The
following persons are presumed to have control:
(a) Each of the investment adviser's
officers, partners, or directors exercising executive responsibility (or
persons having similar status or functions); and
(b) A person who:
(i) Directly or indirectly has the right to
vote twenty-five percent or more of a class of the voting securities of a
corporation or limited liability company;
(ii) Has the power to sell or direct the sale
of twenty-five percent or more of a class of the voting securities of a
corporation or limited liability company;
(iii) Has the right to receive, upon
dissolution, or that has contributed, twenty-five percent or more of the
capital of a partnership or limited liability company; or
(iv) Is the manager of a limited liability
company or the trustee or managing agent of a trust.
(6)
"Custody" means
holding, directly or indirectly, client funds or securities, or having any
authority to obtain possession of them or the ability to appropriate them. An
investment adviser has custody if a related person holds, directly or
indirectly, client funds or securities, or has any authority to obtain
possession of them, in connection with advisory services the investment adviser
provides to clients.
(a) "Custody" includes:
(i) Possession of client funds or securities
unless received inadvertently and returned to the sender promptly, but in any
case within three business days of receiving them;
(ii) Any arrangement (including a general
power of attorney) under which an investment adviser is authorized or permitted
to withdraw client funds or securities maintained with a custodian upon an
investment adviser's instruction to the custodian;
(iii) Any capacity (such as general partner
of a limited partnership, managing member of a limited liability company or a
comparable position for another type of pooled investment vehicle, or trustee
of a trust) that gives an investment adviser or its supervised person legal
ownership of or access to client funds or securities; or
(iv) Any arrangement where the investment
adviser requires the payment of advisory fees six months or more in advance and
in excess of five hundred dollars per client.
(b) Receipt of checks drawn by clients and
made payable to unrelated third parties will not meet the definition of custody
if forwarded to the third party within three business days of receipt and the
adviser maintains a ledger or other listing of all securities or funds held or
obtained inadvertently as set forth in WAC
460-24A-200.
(7)
"Discretionary
authority" means the authority, directly or indirectly, to:
(a) Determine what securities or other
property will be purchased or sold by or on behalf of a client;
(b) Make decisions as to what securities or
other property will be purchased or sold by or for the benefit of a client even
though some other person may have responsibility for such investment decisions;
or
(c) Make decisions as to what
investment advisers to retain on behalf of a client.
(8)
"FINRA" means the Financial
Industry Regulatory Authority, Inc., the self-regulatory organization for
broker-dealers and broker-dealer representatives that is registered as a
national securities association with the Securities and Exchange Commission
under Section 15A of the Securities Exchange Act of 1934, 15 U.S.C. Sec.
78o.
(9)
"Independent
certified public accountant" means a certified public accountant that
meets the standards of independence described in Rule 2-01 (b) and (c) of
Regulation S-X,
17 C.F.R.
210.2-01(b) and (c), as
amended effective March 8, 2005.
(10)
"Independent party" means a
person who:
(a) Is engaged by an investment
adviser to act as a gatekeeper for the payment of fees, expenses, and capital
withdrawals from a pooled investment;
(b) Does not control and is not controlled by
and is not under common control with the investment adviser;
(c) Does not have, and has not had within the
past two years, a material business relationship, including acting as an
independent representative on behalf of a client of the investment adviser,
with the investment adviser;
(d)
Must not negotiate or agree to have material business relations with an
investment adviser, or relationships with entities under common control with an
investment adviser, for a period of two years after serving as the person
engaged in an independent party agreement; and
(e) Is required to act in the best interest
of the limited partners, members, or other beneficial owners.
(11)
"Independent
representative" means a person who:
(a)
Acts as an agent for an advisory client, including in the case of a pooled
investment vehicle, for limited partners of a limited partnership, members of a
limited liability company, or other beneficial owners of another type of pooled
investment vehicle and by law or contract is obliged to act in the best
interest of the advisory client or the limited partners or members, or other
beneficial owners;
(b) Does not
control, is not controlled by, and is not under common control with the
investment adviser;
(c) Does not
have, and has not had within the past two years, a material business
relationship, including acting as an independent party, with the investment
adviser.
(12)
"Investment Adviser Registration Depository" or
"IARD" means the electronic filing system operated by FINRA for
the registration of investment advisers and submission of filings by exempt
reporting advisers.
(13)
"Private fund adviser" means an investment adviser who provides
advice solely to one or more qualifying private funds.
(14)
"Qualified custodian" means
the following independent institutions or entities:
(a) A bank, including a trust company, as
defined in section 202 (a)(2) of the Advisers Act,
15
U.S.C. 80b-2(a)(2), or a
savings association as defined in section 3 (b)(1) of the Federal Deposit
Insurance Act,
12
U.S.C. 1813(b)(1), that has
deposits insured by the Federal Deposit Insurance Corporation under the Federal
Deposit Insurance Act,
12 U.S.C.
1811;
(b) A broker-dealer registered in this state
and under section 15 (b)(1) of the Securities Exchange Act of 1934,
15 U.S.C.
78o(b)(1), holding the
client assets in customer accounts;
(c) A futures commission merchant registered
under section 4f(a) of the Commodity Exchange Act,
7 U.S.C.
6f(a), holding the client
assets in customer accounts, but only with respect to clients' funds and
security futures, or other securities incidental to transactions in contracts
for the purchase or sale of a commodity for future delivery and options
thereon;
(d) A foreign financial
institution that customarily holds financial assets for its customers, provided
that the foreign financial institution keeps the advisory clients' assets in
customer accounts segregated from its proprietary assets; and
(e) The transfer agent for an open-end
company as defined in section 5 (a)(1) of the Investment Company Act of 1940,
15 U.S.C.
80a-5(a)(1), only with
respect to shares of the open-end company.
(15)
"Qualifying private fund"
means a private fund that:
(a) Qualifies for
the exclusion from the definition of "investment company" provided in section 3
(c)(7) of the Investment Company Act of 1940,
15 U.S.C.
80a-3(c)(7);
(b) Is not registered under section 8 of the
Investment Company Act of 1940,
15 U.S.C.
80a-8; and
(c) Has not elected to be treated as a
business development company pursuant to section 54 of Investment Company Act
of 1940,
15 U.S.C.
80a-53.
(16)
"Related person" means any
person, directly or indirectly, controlling or controlled by the investment
adviser, and any person that is under common control with the investment
adviser.
(17)
"Supervised
person" means any partner, officer, director (or other person occupying
a similar status or performing similar functions), or employee of an investment
adviser, or other person who provides investment advice on behalf of the
investment adviser and is subject to the supervision and control of the
investment adviser. The definition includes investment adviser representatives,
employees, independent contractors, or other associated persons and supervised
personnel, or other persons acting on behalf of the investment
adviser.
Statutory Authority:
RCW
21.20.450,
21.20.900,
21.20.100,
21.20.050 - [21.20].060.
08-18-033, §
460-24A-005, filed 8/27/08,
effective 9/27/08.