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New Jersey Register
Volume 34, Number 21
Monday, November 4, 2002
Rule Proposal

Law And Public Safety
Division Of Consumer Affairs
Bureau Of Securities
Bureau Of Securities Rules

Proposed Readoption with Amendments: N.J.A.C. 13:47A

Proposed Repeal: N.J.A.C. 13:47A-1.4

Authorized By: Franklin L. Widmann, Chief, Bureau of Securities.

Authority: N.J.S.A. 49:3-47 et seq., specifically 49:3-67(a).
Calendar Reference: See Summary below for explanation of exception to calendar requirement.
Proposal Number: PRN 2002-388.

Submit written comments by January 3, 2003 to:

Franklin L. Widmann,
Chief Bureau of Securities
153 Halsey Street, 6th Floor
PO Box 47029
Newark, New Jersey 07101

The agency proposal follows:

Summary

Pursuant to the sunset provisions of Executive Order No. 66(1978), the Bureau of Securities (the Bureau) has evaluated the rules at N.J.A.C. 13:47A, which are scheduled to expire on March 25, 2003, pursuant to N.J.S.A. 52:14B-5.1c. The Bureau has determined that the rules are still necessary, reasonable and proper for their intended purpose.

The Bureau of Securities administers and enforces New Jersey's Uniform Securities Law (N.J.S.A. 49:2-1 et seq.) which governs the registration of securities, broker-dealers, investment advisers, financial planners and agents of broker-dealers and investment advisers doing business in or from the State. The Bureau provides protection of New Jersey's investing public from fraudulent stock sales which includes investigative efforts such as monitoring the Internet and on-line services for fraudulent securities activity. In 2001, the Bureau oversaw $11.264 billion worth of securities registered to be sold in New Jersey.

As of December 31, 2001, the Bureau's Broker-Dealer/Agent Registration Section had registered 2,873 securities firms and 169,389 agents. New Jersey continues to place fourth in the country in the number of agents registered, with approximately 20 percent of the nationwide total.

The Bureau monitors compliance with the investment adviser laws through the registration process administered by the Bureau's Investment Adviser Section. During the year 2001, approximately 1,600 investment advisers were registered with the Bureau.

The Complaints and Investigations Section handled approximately 1,200 complaints and inquiries in 2001. During 2001, $8,678,500 in penalties were assessed and more than $1.3 million in restitution was awarded to investors.

During its 1992 sunset review, the Bureau modified its rules to permit New Jersey to fully participate in the Central Registration Depository (CRD). CRD is a joint venture of the North American Securities Administrators Association (NASAA) and the National Association of Securities Dealers (NASD). NASAA is the organization of the state, provincial and territorial securities administrators in the United States, Canada and Mexico who are responsible for investor protection and efficient functioning of the capital markets at the grassroots level. NASD is an industry organization of securities dealers which has certain self-regulatory powers granted to it by Federal statutes or regulations.

The CRD System provides information about NASD-registered securities broker- dealers and their agents (or sales representatives). CRD also provides a place where a single registration statement may be filed electronically by broker- dealers and agents to effectively apply for registration in any state, province or territory that participates in the System. The CRD has since been expanded to incorporate registration capabilities for both Investment Adviser Firms and their representatives. Proposed amendments and new rules incorporating registration requirements for Investment Adviser representatives were adopted on November 28, 2001 (effective January 7, 2002, operative July 1, 2002) and are included in the readopted rules proposed herein.

The Bureau also proposes a number of minor and technical amendments to clarify the rules, to benefit both the consumer and the regulated community, and to codify current standards of practice. It also proposes to delete those portions of the rules which are no longer applicable.

Subchapter 1 sets forth the application process and the minimum-net-capital and bonding requirements for broker-dealers, outlines the criteria for maintaining books, records, sales and advertising material, and provides general information for broker-dealers, such as procedures for withdrawal of registration and application of a successor. It also requires each broker- dealer to file an amendment with the CRD or the Bureau whenever the broker- dealer undergoes a firm-name change, change in office address or other change in status.

The Bureau proposes to amend N.J.A.C. 13:47A-1.1(a)2 to clarify that the Bureau recognizes that an individual's consent to service of process is contained in page one of the Form U-4, Uniform Application for Securities Industry Registration or Transfer. Therefore, the Form U-4 will satisfy this requirement.

The Bureau proposes to delete N.J.A.C. 13:47A-1.1(a)4 and 5. Paragraph (a)4 requests a statement of minimum net capital which is no longer required due to the enactment of the National Securities Markets Improvement Act of 1996 (NSMIA), 15 U.S.C. 78o15(h). The Federal Act pre-empted the State from having a different minimum net capital requirement from that of the SEC. Therefore, requesting that information for verification is redundant. Paragraph (a)5 requests an accounting of the nature and location of each business in which the applicant has engaged during the preceding five years. This information is readily available in CRD and can be obtained from the website. Therefore, it is not necessary to request the information separately.

The Bureau proposes to amend N.J.A.C. 13:47A-1.1(c) and (d) to reduce the number of fingerprint cards required for registration from two to one as duplicate cards are not necessary.

The Bureau proposes to repeal N.J.A.C. 13:47A-1.4 to recognize that the annual broker-dealer financial report filing requirement can be eliminated without diminishing the enforcement and regulatory powers of the Bureau, because the information can be obtained from the broker-dealer or from the SEC in the form of the firm's most recent Financial and Operational Combined Uniform Single (FOCUS) Report filing.

The Bureau proposes to modify N.J.A.C. 13:47A-1.9(a)7 to make the time frame within which a broker-dealer has to terminate an agent consistent with the timetable set by the NASD.

The Bureau proposes an amendment to N.J.A.C. 13:47A-1.9(e) to reduce the number of fingerprint cards required for registration from two to one as duplicate cards are not necessary.

The Bureau proposes to amend N.J.A.C. 13:47A-1.11(b) to require a non-NASD broker-dealer that elects to withdraw its registration to utilize the Form BDW as the appropriate withdrawal form no matter how the initial application was filed.

Subchapter 2 sets forth the application process and the minimum-net-capital and bonding requirements for investment advisors, outlines the criteria for maintaining books, records, sales and advertising material, and provides general information for investment advisors, such as procedures for withdrawal of registration and application of a successor.

Subchapter 3 sets forth the application and change-of-status procedures for agents of broker-dealers, issuer-agent registration and general partners.

The Bureau proposes an amendment to N.J.A.C. 13:47A-3.1(a)1 to clarify that the Bureau recognizes that an individual's consent to service of process is contained in page one of the Form U-4, Uniform Application for Securities Industry Registration or Transfer. Therefore, the Form U-4 will satisfy this requirement.

The Bureau proposes to amend N.J.A.C. 13:47A-3.1(a)2 to reduce the number of fingerprint cards required for registration from two to one as duplicate cards are not necessary.

The Bureau proposes to add N.J.A.C. 13:47A-3.1(c) to codify the policy which requires written authorization from an agent's multiple employers if the agent is affiliated with more than one broker-dealer and/or investment adviser.

The Bureau proposes to add N.J.A.C. 13:47A-3.1(d) which excludes agents whose multiple affiliations are with firms that have an ownership interest that is disclosed on the Form BD from having to submit the written authorization required in subsection (c).

The Bureau proposes to add N.J.A.C. 13:47A-3.1(e) to codify the policy that an agent affiliated with more than one broker-dealer and/or investment adviser may be required to enter into a restrictive agreement with regard to his or her activities or supervision in consideration of his or her registration with the State of New Jersey.

The proposed amendment to N.J.A.C. 13:47A-3.2(a) corrects a reference to the incorrect item number on the Disclosure Reporting Page of the Form U-4 and eliminates the reference to the termination filing time frame requirements because they are addressed in N.J.A.C. 13:47A-1.9(a)7 and are reiterated in N.J.A.C. 13:47A-3.2(b).

The Bureau proposes to modify N.J.A.C. 13:47A-3.2(b) to make the time frame within which a broker-dealer has to terminate a former agent's registration consistent with the timetable set by the NASD. It also requires non-NASD member broker-dealers to file a notice of termination directly with the Bureau.

The proposed amendment to N.J.A.C. 13:47A-3.3(b) clarifies that issuer agent registration is exempted under the provisions specified, provided that no commissions are paid.

The Bureau proposes to add N.J.A.C. 13:47A-3A.1(b) to codify the policy which requires written authorization from an agent's multiple employers if the agent is affiliated with more than one broker-dealer and/or investment adviser.

The Bureau proposes to add N.J.A.C. 13:47A-3A.1(c) which excludes individuals whose multiple affiliations are with firms that have an ownership interest of one in the other that is disclosed on the Form BD from having to submit the written authorization required in subsection (b).

The Bureau proposes to add N.J.A.C. 13:47A-3A.1(d) to make the restricted registration option for registered advisers consistent with that for registered representatives.

Subchapter 4 deals with examinations for broker-dealers, investment advisers and agents, and it sets forth the Bureau's standard with respect to examination waivers.

The Bureau proposes to delete the two year continuous securities related business requirement in N.J.A.C. 13:47A-4.3, for agents of an issuer. By removing the requirement, the Bureau is fostering the ability of small, start- up companies to raise investment capital without having to engage a broker- dealer for the issue. Removing this provision will allow issuers additional flexibility to register agents who may then sell their securities (which most broker-dealers would not sell due to the size of these small business opportunities). This will provide added relief for the start-up to raise investment capital.

The Bureau proposes to add N.J.A.C. 13:47A-4.4(a)3 through 7 to incorporate its previously issued order dated December 7, 2001, published in the CCH, Inc. Register for blue sky laws, which authorizes investment adviser representative examination waivers for persons holding one of five professional designations or certificates.

Subchapter 5 deals with the renewal of registration for broker-dealers, investments advisors or agents.

Subchapter 6 is reserved.

Subchapter 7 addresses miscellaneous topics, including consent to service of process, application effective dates, registrants currently registered with the CRD in other states, and filing of information with the CRD. The subchapter also defines such terms as "custody of clients funds or securities," "broker- dealer" and "prospectus."

The Bureau proposes a technical amendment to N.J.A.C. 13:47A-7.1(a)1i to clarify that the Bureau recognizes an agent's consent to service of process is contained in page one of the Form U-4, Uniform Application for Securities Industry Registration or Transfer. Therefore, the Form U-4 will satisfy this requirement.

The Bureau proposes to add N.J.A.C. 13:47A-7.1(a)1iv to identify that the Bureau recognizes an investment adviser representative's consent to service of process is contained in page one of the Form U-4, Uniform Application for Securities Industry Registration or Transfer. Therefore, the Form U-4 will satisfy this requirement.

The Bureau proposes an amendment to N.J.A.C. 13:47A-7.5 to clarify that only complete applications will be made effective on noon on the 30th day after filing with the Bureau. This amendment also defines a complete application and codifies a policy to allow for home state approval prior to registration in the State of New Jersey.

The Bureau proposes a technical amendment to N.J.A.C. 13:47A-7.7 to correct the section heading and sentence grammar.

Subchapter 8 sets forth the Bureau's policy concerning assessment of penalties for a registrant's failure to file information with the Bureau or the CRD.

Subchapter 9 is reserved.

Subchapter 10 deals with the registration of securities and sets forth the Bureau's standards concerning registration by coordination, qualification, and notification. Appendices A through C set forth the New Jersey Addendum to Registration Statement, New Jersey Registration Statement for Registration by Notification and Statement of Eligibility for Registration by Notification.

Subchapter 11 includes all of the relevant Bureau forms, including registration, withdrawal and service of process.

Subchapter 12 sets forth interpretations of certain exemptions for securities transactions and offerings, employee-benefit plans and accredited investors.

The Bureau proposes to delete the reference to Employee Benefit Plan notification in N.J.A.C. 13:47A-12.2 because such notice filings were removed from N.J.S.A. 49:3-50 in December 1997.

Subchapter 13 sets forth the general rules of practice applicable to the Bureau, including the address and business hours of the Bureau, provisions for service of process, and guidelines for legal practice concerning the Bureau.

Subchapter 14 includes the rules of practice pertaining to private investigations conducted by the Bureau. The subchapter addresses such topics as evidence, transcripts, witnesses, and failure to cooperate.

As the Bureau has provided a 60-day comment period on this notice of proposal, this notice is exempted from the rulemaking calendar requirement pursuant to N.J.A.C. 1:30-3.3(a)5.

Social Impact

The rules which the Bureau proposes for readoption will continue to have a positive impact upon the welfare of the investing public. The rules will continue to facilitate the Bureau's ability to regulate the securities industry and to take enforcement action against those who would defraud the public or fail to disclose the information to potential investors necessary to facilitate an informed investment decision. Thus, the rules proposed for readoption help to maintain the confidence in, and the integrity of, the securities markets and securities industry in New Jersey.

The proposed amendments, which establish uniform standards and forms for all broker-dealers and investment advisers in the State, help to further streamline the application process. This will enable the Bureau to more effectively serve the public by allowing it to concentrate its efforts on compliance and enforcement.

Economic Impact

The rules which the Bureau proposes for readoption have had a direct economic impact upon all registrants by imposing miscellaneous application fees and by imposing minimum net capital and bonding requirements consistent with NSMIA. Pursuant to N.J.S.A. 45:1-3.2, the fees have enabled the Bureau to maintain financial solvency while continuing to fulfill its duties to regulate the profession for the benefit and protection of the investing public. The Bureau has reviewed its financial position and it has determined that these fees are sufficient to comport with N.J.S.A. 45:1-3.2.

The rules proposed for readoption will also continue to have an economic impact upon registrants by imposing an ongoing administrative cost associated with completing the appropriate forms for filing with the Bureau. In addition, registrants may incur costs associated with engaging professional services of accountants or attorneys to facilitate the registration process and to monitor their financial positions and business affairs. These costs are difficult to estimate, and they will vary depending upon the amount of work which each individual registrant will require and the rate which the professional will impose for his or her services.

In addition, the rules proposed for readoption will continue to impose an administrative cost upon each registrant who must comply with the Bureau's recordkeeping requirements. This cost will also vary depending upon the storage and other recordkeeping systems of each individual registrant.

In addition, the recent incorporation of electronic mutual fund and unit investment trust filing has enabled the Bureau to operate more efficiently by reducing the amount of incoming paper and, therefore, the number of personnel required to process that paper. Additionally, electronic filing eliminates traditional storage in filing cabinets and reduces floor space and containers, all of which could have a positive economic impact upon the public in the form of reduced overhead costs. The Bureau does not expect the proposed amendments to have any financial impact on the registrants or the public.

Federal Standards Statement

A Federal standards analysis is not required because the rules proposed for readoption and the proposed amendments do not exceed Federal standards. The proposed rules are consistent with applicable Federal standards in the National Securities Markets Improvement Act of 1996 (NSMIA) (P.L. 104-290) (1996), the Securities Act of 1933, (15 U.S.C. 77a et seq.), the Securities Exchange Act of 1934, (15 U.S.C. 78a et seq.), the Investment Advisers Act of 1940, (15 U.S.C. 80b-1 et seq.), the Investment Company Act of 1940, (15 U.S.C. 80a-1 et seq.) and in the applicable regulations, the Securities Act of 1933 Rules, (17 C.F.R. 230 et seq.), the Securities Exchange Act of 1934 Rules, (17 C.F.R. 240 et seq.), the Investment Advisers Act of 1940 Rules, (17 C.F.R. 270 et seq.), and the Investment Company Act of 1940 Rules, (17 C.F.R. 275 et seq.).

Jobs Impact

The Bureau believes that the rules proposed for readoption and the proposed amendments will not result in the generation or loss of jobs. The Bureau proposes to readopt the rules and adopt the amendments to continue to foster the efficient working of the securities markets in the State, and to protect the investing public.

Agriculture Industry Impact

The proposed readoption and amendments will not have any impact on the agriculture industry in the State.

Regulatory Flexibility Analysis

The Regulatory Flexibility Act (the Act), N.J.S.A. 52:14B-16 et seq., requires the Bureau to give a description of the types and an estimate of the number of small businesses to which the rules proposed for readoption and amendments will apply. If registrants of the Bureau are considered "small businesses" for the purposes of the Act, the following analysis applies.

The Act requires the Bureau to set forth the reporting, recordkeeping and other compliance requirements of the rules proposed for readoption and amendments including the kinds of professional services likely to be needed to comply with the requirements.The Act further requires the Bureau to estimate the initial and annual compliance costs of the rules proposed for readoption and amendments with an indication of the varying impact on small businesses of differing types and sizes. In addition, the Act requires the Bureau to outline the manner in which it has designed the rules to minimize any adverse economic impact upon small businesses.

The rules proposed for readoption impose reporting, recordkeeping and compliance requirements upon the regulated community. Specifically, to comply with the rules, applicants for registration as broker-dealers must adhere to the standards and provide the necessary financial and other background information to the Bureau using the appropriate forms as set forth in subchapter 1, and they must supply information to the Bureau as provided by the rules. In addition, broker-dealers must maintain books, records, sales and advertising materials as provided by N.J.A.C. 13:47A-1.10 and 1.10A.

Investment advisers must utilize the appropriate forms and provide the information required by the Bureau in subchapter 2. They must adhere to the bond requirements pursuant to N.J.A.C. 13:47A-2.3 and 2.4, and also maintain books, records and sales and advertising material pursuant to N.J.A.C. 13:47A-2.6 and 2.6A.

Agents of broker-dealers must adhere to the requirements set forth in subchapter 3. Specifically, they must make application with the Bureau pursuant to N.J.A.C. 13:47A-3.1 and conform to the requirements set forth in N.J.A.C. 13:47A-3.2 to make any amendments.

The rules proposed for readoption in subchapter 4 require broker-dealers, investment advisers and agents to pass a securities examination given by a state which the Bureau recognizes as acceptable.

All broker-dealers, investment advisers and agents must renew their registrations on a timely basis pursuant to the standards in subchapter 5.

Pursuant to subchapter 7, all broker-dealers, investment advisers and agents must provide the Bureau with irrevocable consent forms appointing the Bureau Chief, or his or her successor in office, as attorney to receive service of process on the appropriate forms as provided by the rules.

Finally, subchapter 10 requires any person seeking registration by coordination, qualification, or notification to furnish the information to the Bureau set forth in N.J.A.C. 13:37A-10.2 through 10.4.

The rules proposed for readoption may continue to require registrants to engage the professional services of accountants and attorneys to assist in the application process. They will also continue to have an economic impact upon registrants by imposing application fees as well as the ongoing administrative cost associated with completing the appropriate forms for filing with the Bureau. The costs associated with engaging professional services of accountants or attorneys are difficult to estimate, and they will vary depending upon the amount of work which each individual registrant will require and the rate which the professional will collect for his or her services. In addition, the rules proposed for readoption will continue to impose an administrative cost upon each registrant who must comply with the Bureau's recordkeeping requirements. This cost will also vary depending upon the storage and other recordkeeping mechanisms of each individual registrant.

The Bureau has designed the rules proposed for readoption to minimize adverse economic impact upon the regulated community by continuing to allow New Jersey to fully participate in the CRD, which will streamline the application process and enable the Bureau to operate as efficiently as possible. Because the Bureau proposes to readopt the rules to facilitate its efficient operations and to protect the welfare of the investing public, the rules will apply to all members of the regulated community, which as of July 1, 2002, includes Investment Advisor firms and their representatives.

The proposed amendments will impose no initial or ongoing costs to registrants. In fact, there will be a slight positive impact to the electronic mutual fund and unit investment trust filers who no longer have to pay postal fees to submit their notice filings, as set forth in the Economic Impact statement.

The Bureau has designed the proposed amendments to minimize adverse economic impact upon the regulated community by eliminating these fees, which it has also determined will be cost-efficient. Because the Bureau has designed the proposed amendments to continue to facilitate the welfare of the investing public, they will apply uniformly to all members of the regulated community.

Smart Growth Impact

The Bureau believes that the rules proposed for readoption with amendments will not have any impact upon the achievement of smart growth or upon the implementation of the State Development and Redevelopment Plan.

Full text of the proposed readoption may be found in the New Jersey Administrative Code at N.J.A.C. 13:47A.

Full text of the proposed amendments and repeal follows:

<< NJ ADC 13:47A-1.1 >>

13:47A-1.1 Application for registration for NASD members

(a) Any person who is a member of the National Association of Securities Dealers, Incorporated (NASD), desiring to transact business in the State of New Jersey as a broker-dealer shall file an application with the Bureau of Securities by filing the application with the NASAA/NASD Central Registration Depository (CRD) on the form designated as Form BD, Uniform Application for Broker-Dealer Registration, or any successor form to the Form BD prescribed by the CRD for filing a broker-dealer application. The requisite registration fee shall be submitted with the application filed with the CRD in the amount of $250.00 for a one year registration term. Failure to pay the registration fee as above, within the billing time limits established by the Bureau or by the CRD, shall be a ground for immediate revocation of the registration. The applicant shall supplement the application filed with the CRD by directly filing with the Bureau of Securities any additional information which the Bureau Chief requires. The 30-day time period for review of an application will not commence until the applicant files all documents or material facts specified and required. The following additional information shall be required to be filed with the Bureau of Securities for all broker-dealer applications and no application shall be deemed complete until all of the following are properly submitted, unless the requirements are waived by the Bureau Chief:

1. A consent to service of process executed by the applicant as set forth in N.J.A.C. 13:47A-7.1. A fully completed and executed page 1 (Execution Page of the Form BD<<+)+>> Uniform Application for Broker-Dealer Registration or a successor form as prescribed by the CRD shall satisfy this requirement;

2. A consent to service of process executed by each officer, director, general partner or limited partner of the applicant who is to act as an agent in the State of New Jersey, as set forth in N.J.A.C. 13:47A-7.1. A fully completed and executed Form U-2<<+,+>> Uniform Consent to Service of Process<<+,+>> for each person<<+, or a fully completed and executed page 1 of Form U-4, Uniform Application for Securities Industry Registration or Transfer, or a successor form,+>> shall satisfy this requirement;

3. (No change.)

<<-4. A statement of minimum net capital as set forth in N.J.A.C. 13:47A-1.6;->>

<<-5. A statement of the nature and location of each business in which the applicant has engaged during the preceding five years; and->>

<<-6.->> <<+4.+>> (No change in text.)

(b) (No change.)

(c) If the applicant is a natural person and is not a member of the NASD, the New York Stock Exchange or the American Stock Exchange, he or she shall submit to the Bureau of Securities as part of the application, <<-two->> <<+ one+>> (non<<--->> criminal) fingerprint card<<-s (one State Police card and one Federal Bureau of Investigation card)->> with impressions taken by a recognized law enforcement agency.

(d) If the applicant is a corporation or partnership and is not a member of the NASD, the New York Stock Exchange or the American Stock Exchange, it shall submit to the Bureau of Securities as part of the application, <<- two->> <<+one+>> applicant (noncriminal) fingerprint card<<-s (one State Police card and one Federal Bureau of Investigation card)->> for each officer, director, controlling person or partner with all of the impressions taken by a recognized law enforcement agency.

(e) (No change.)

<< NJ ADC 13:47A-1.4 >>

13:47A-1.4 <<-Annual financial report->> <<+(Reserved)+>>

<<-Subject to the limitations of 15 of the Securities Exchange Act of 1934 (15 U.S.C. 78), every registered broker-dealer must file with the Bureau Chief an annual certified report of financial condition during each calendar year. Said report will be due not later than 60 days after the termination date of each report; provided that reports for any two consecutive years shall not be as of termination dates within four months of each other. Requests for extensions of time for the filing of the report must be made in writing to the Bureau Chief in advance of the due date.->>

<< NJ ADC 13:47A-1.9 >>

13:47A-1.9 Change of status; submission of form

(a) A registered broker-dealer who is registered with New Jersey via the NASAA/NASD CRD shall file an amendment with the CRD on the amendment form prescribed by the NASAA/NASD CRD whenever any of the following events occur:

1.-6. (No change.)

7. The registered broker-dealer terminates the employment of an agent. This amendment shall be filed within <<-five->> <<+30+>> days of the termination. No filing fee is required for this type of amendment, unless the NASAA/NASD CRD prescribes otherwise;

8.-9. (No change.)

(b)-(d) (No change.)

(e) A registered broker-dealer, if a corporation or partnership, shall file with the Bureau of Securities or the CRD, whichever is applicable, <<- two->> <<+one+>> applicant (non<<--->> criminal) fingerprint card<<- s (one State Police card and one Federal Bureau of Investigation card)->> with all of the impressions taken by a recognized law enforcement agency, for each officer, director, controlling person or partner who commences any employment or affiliation with said registered broker-dealer no later than five days after the commencement of such employment or affiliation. Those persons exempt from filing <<+a+>> fingerprint card<<-s->> with the Securities and Exchange Commission pursuant to Rule 17f-2 promulgated under the Securities Exchange Act of 1934 or its successor rule shall be exempt from filing fingerprint cards with the Bureau pursuant to this subsection.

<< NJ ADC 13:47A-1.11 >>

13:47A-1.11 Withdrawal of broker-dealer registration

(a) (No change.)

(b) A broker-dealer registered in New Jersey by direct filing with the Bureau of Securities because it is not eligible for registration via the CRD shall file directly with the Bureau a Form BDW, <<-if its initial application was filed on a Form BD,->> when it desires to withdraw its registration as a broker-dealer in the State of New Jersey. Such request will become effective 30 days after filing with the Bureau.

<< NJ ADC 13:47A-3.1 >>

13:47A-3.1 Agents of broker-dealers

(a) Any person desiring to act in the State of New Jersey as an agent of a non-NASD member broker-dealer registered in New Jersey directly with the Bureau of Securities or as an agent of an issuer shall file an application with the Bureau of Securities on a form designated U-4, as set forth in N.J.A.C. 13:47A-11.3. Such application shall be accompanied by:

1. A consent to service of process executed by the applicant. <<+A fully executed page one of Form U-4, Uniform Application for Securities Industry Registration or Transfer, will satisfy this requirement+>> ;

2. <<-Two->> <<+One+>> applicant non<<--->> criminal fingerprint card<<-s (one State Police card and one FBI card)->> with impressions taken by a recognized law enforcement agency; and

3. (No change.)

(b) (No change.)

<<+(c) Agents affiliated in a securities related position with more than one employer (for example, with broker-dealers or investment advisors) may be registered in the State of New Jersey provided a letter is submitted with the agent's application on each affiliated firm's letterhead stating that:+>>

<<+1. The employer is aware of the agent's multiple affiliations;+>>

<<+2. The employer accepts the agent's multiple affiliations; and+>>

<<+3. The employer accepts full responsibility for the agent's securities related activities.+>>

<<+(d) Agents whose multiple affiliations are with firms that have an ownership interest of one in the other are not required to submit the letters required by (c) above, provided that the relationships between the firms in question are disclosed on the Form BD.+>>

<<+(e) The Bureau may require an agent to enter into an agreement requiring heightened supervision and other restrictive conditions as a condition of granting that agent's application for registration.+>>

<< NJ ADC 13:47A-3.2 >>

13:47A-3.2 Change of status; agents; submission of form

(a) A registered agent shall file an amendment with the CRD, by filing or updating a Form U-4 Uniform Application for Securities Industry Registration or Transfer, or its successor form, along with the fee, if any, prescribed by the CRD, whenever the agent changes his or her name or home address, and whenever a change in the answers on his or her original application for registration occurs, as to arrests, convictions of any crime, disciplinary actions by any administrative body, restraints, injunctions, suspensions, revocations, denials, or judgments based on fraud<<+,+>> or to any other information contained in answers to Item <<-22->> <<+23+>> and the Disclosure Reporting Page of the Form U-4. The amendment(s) must be filed within 20 days of the occurrence <<-named->> <<+identified+>> therein. Whenever an agent <<-terminates or->> commences employment with a broker-dealer or issuer, the agent must file the amendment within five days of the <<- termination or->> commencement <<+of employment+>> . For agents of non- NASD member broker-dealers, the amendments shall be filed directly with the Bureau of Securities.

(b) Whenever an agent terminates employment with a broker-dealer registered in New Jersey via the CRD, the broker-dealer <<-must->> <<+shall+>> file with the CRD or Bureau, as appropriate, the Form U-5 Uniform Termination Notice for Securities Industries Registration within <<-five->> <<+30+>> days of the termination. <<+For agents of non-NASD member broker-dealers, the Form U-5, Uniform Termination Notice for Securities Industries Registration, shall be filed directly with the Bureau of Securities.+>>

<< NJ ADC 13:47A-3.3 >>

13:47A-3.3 Issuer-agent registration

(a) (No change.)

(b) Agent registration is not required for an individual who represents an issuer in effecting transactions exempted by N.J.S.A. 49:3- 50(a)(1) (securities issued or guaranteed by the United States, a State, or political subdivision thereof); N.J.S.A. 49:3-50(a)(2) (Canadian and other foreign government securities); N.J.S.A. 49:3-50(a)(3) (bank securities); N.J.S.A. 49:3-50(a)(11) (employee benefit plans); and all of the transactional exemptions under N.J.S.A. 49:3-50(b) <<+provided no commission or other remuneration is paid or given directly or indirectly for soliciting any person in this State+>> .

(c) (No change.)

<< NJ ADC 13:47A-3A.1 >>

13:47A-3A.1 Registration of State registered investment adviser representatives

(a) (No change.)

<<+(b) Agents affiliated in a securities related position with more than one employer (for example, with broker-dealers or investment advisors) may be registered in the State of New Jersey, provided a letter is submitted with the agent's application on each affiliated firm's letterhead stating that:+>>

<<+1. The employer is aware of the agent's multiple affiliations;+>>

<<+2. The employer accepts the agent's multiple affiliations; and+>>

<<+3. The employer accepts full responsibility for the agent's securities related activities.+>>

<<+(c) Individuals whose multiple affiliations are with firms that have an ownership interest of one in the other are not required to submit the letters required by (b) above provided that the relationships between the firms in question are disclosed on the Form BD.+>>

<<+(d) The Bureau may require an agent to enter into an agreement requiring heightened supervision and other restrictive conditions as a condition of granting that agent's application for registration.+>>

<<-(b)->> <<+(e)+>> (No change in text.)

<< NJ ADC 13:47A-4.3 >>

13:47A-4.3 Requests for waiver of agent examinations

(a) Except for requests made pursuant to (c) below, requests for waiver of agent examination requirements will be granted only on the basis of knowledge, training and experience in the securities field. Any person<<+, other than the agent of an issuer registered pursuant to N.J.A.C. 13:47A-3.3,+>> requesting a waiver must have been continuously and lawfully active in the securities field for a period of at least two full years prior to filing the request.

(b)-(c) (No change.)

<< NJ ADC 13:47A-4.4 >>

13:47A-4.4 Examination requirements for investment adviser representatives

(a) An individual applying to be registered as an investment adviser or investment adviser representative shall provide the Bureau Chief with proof of having obtained a passing score on one of the following examinations <<+or of having obtained one of the following certifications+>> :

1. The Uniform Investment Adviser Law Examination (Series 65 examination); <<-or->>

2. The General Securities Representative Examination (Series 7 examination) and the Uniform Combined State Law Examination (Series 66 examination)<<-.->> <<+;+>>

<<+3. The Chartered Financial Planner (CFP) certification awarded by the Certified Financial Planner Board of Standards, Inc.;+>>

<<+4. The Chartered Financial Consultant (ChFC) certification awarded by the American College, Bryn Mawr, Pennsylvania;+>>

<<+5. The Personal Financial Specialist (PFS) certification awarded by the Institute of Chartered Financial Analysts;+>>

<<+6. The Chartered Financial Analyst (CFA) certification awarded by the Institute of Chartered Financial Analysts; or+>>

<<+7. The Chartered Investment Counselor (CIC) certification awarded by the Investment Counsel Association of America, Inc.+>> (b)-(c) (No change.)

<< NJ ADC 13:47A-7.1 >>

13:47A-7.1 Consent to service of process

(a) The irrevocable consent appointing the Bureau Chief or his or her successor in office as attorney to receive service of any lawful process in any noncriminal suit, action or proceeding against him or her shall be filed concurrently with the application directly with the Bureau Chief, except as provided by (a)1ii below.

1. The Bureau of Securities accepts the following forms:

i. For agent applications for registration in New Jersey, a fully executed Form U-2 Uniform Consent to Service of Process <<+or a fully executed page 1 of Form U-4, Uniform Application for Securities Industry Registration or Transfer+>> ;

ii. (No change.)

iii. For investment advisor applications for registration in New Jersey, a fully executed page 1 (Execution Page) of the Form ADV Uniform Application for Investment Advisor Registration or a successor form as prescribed by the Bureau of Securities may be filed with the Bureau to fulfill the requirement of subsection (a) of this section for the investment advisor<<-.->> <<+; and+>>

<<+iv. For investment advisor representatives, a fully executed page 1 of Form U-4, Uniform Application for Securities Industry Registration or Transfer.+>>

<< NJ ADC 13:47A-7.5 >>

13:47A-7.5 <<-Expediting->> <<+Effective date of+>> applications

Pursuant to Section 49:3-57(a) of the Uniform Securities Law (1967), <<+ complete+>> applications become effective on noon on the 30th day after filing with the Bureau of Securities. <<-Applications->> <<+Complete applications+>> filed with the CRD to effectuate registration in New Jersey will become effective on noon on the 30th day after notice to the Bureau of Securities by the CRD that the application has been filed with the CRD. <<+An application is deemed complete when all requested information is received by the Bureau.+>> Any applicant desiring an earlier effective date must submit a written request to expedite to the Bureau Chief, such request to be made a part of the application and the applicant's permanent file. Acceleration is not automatic, and in no case shall an application become effective in less than five full business days after having been filed with the Bureau of Securities. <<+The effective date of an applicant's registration may be deferred until the applicant has received an approved status from his or her home state.+>>

<< NJ ADC 13:47A-7.7 >>

13:47A-7.7 <<-Transition rule for registrants currently registered with the Bureau of Securities and new registrants->> <<+New registrations+>>

(a) (No change.)

(b) New applicants who are not registered either directly with the Bureau of Securities or via the CRD must file their application for registration with the CRD in accordance with N.J.A.C. 13:47A-1.1, if they <<+are+>> eligible to do so. Only those new applicants who are not eligible for filing with the CRD may file their applications directly with the Bureau of Securities in accordance with N.J.A.C. 13:47A-1.2.

<< NJ ADC 13:47A-12.2 >>

13:47A-12.2 Employee benefit plans

(a) N.J.S.A. 49:3-50(a)(11) provides an exemption from registration for<<-,->> "<<-a->> ny investment contract issued in connection with an employees' or professional stock purchase, savings, pension, profit-sharing, retirement or similar benefit plan <<-if the bureau chief is notified in writing 30 days before the inception of the plan.... "->> <<+and securities issued pursuant to an employee benefit plan+>> . N.J.S.A. 49:3- 50(a)(11) <<-requires a 30-day notification and->> exempts the agreement between the employer and employee insofar as it may be deemed to be an investment contract. With respect to employee benefit plans which are qualified under Section 401 of the Internal Revenue Code, subject to the provisions of Part 4 of Subtitle B of Title I of ERISA, or administered by a national or state bank acting in a fiduciary capacity, N.J.S.A. 49:3-50(a)(11) shall be construed to provide a transactional exemption for all securities underlying the investment contract.

(b) (No change.)

<<-(c) The 30-day notification requirement of N.J.S.A. 49:3-50(a)(11) may be fulfilled by filing a letter with the Bureau of Securities setting forth pertinent information, which shall include the name and address of the issuer, the name and address of participating employers and the approximate number of New Jersey employees eligible to participate in the plan. The letter filing will be deemed to constitute full compliance with the notice requirement of N.J.S.A. 49:3-50(a)(11). The Bureau Chief may request additional information on a case-by-case basis.->>

Recodify existing (d) and (e) as <<+(c) and (d)+>> (No change in text.)

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Posted November 4, 2002