Statutory Authority: 6 Delaware Code,
Sections 7306(a)(17), 7307, 7309(b)(2), 7309(b)(9), 7309(c), 7309A(f), 7312, 7314(b)(4), 7317(c), 7325(b) (6 Del.C. §§7306(a)(17); 7307; 7309(b)(2), (b)(9), (c); 7309A(f); 7312, 7314(b)(4), 7317(c), 7325(b))
Delaware Securities Act, Parts F and G
608 Registration Exemption for Certain Canadian Broker-Dealers
Notice of Proposed Revisions to the Rules and Regulations Pursuant to the Delaware Securities Act
In compliance with the State’s Administrative Procedures Act (APA - Title 29, Chapter 101 of the Delaware Code) and section 7325(b) of Title 6 of the Delaware Code, the Division of Securities of the Delaware Department of Justice hereby publishes notice of proposed revisions to the Rules and Regulations Pursuant to the Delaware Securities Act. The Division proposes hereby to amend sections 600, 601, 608 and 700 of the Rules and Regulations Pursuant to the Delaware Securities Act and to add a new section 610.
Persons wishing to comment on the proposed regulations may submit their comments in writing to:
James B. Ropp, Securities Commissioner
Department of Justice
State Office Building, 5th Floor
820 N. French Street
Wilmington, DE 19801
The comment period on the proposed regulations will be held open for a period of thirty days from the date of publication of this notice in the Delaware Register of Regulations.
Summary of the Proposed Revisions
1. Canadian Broker-Dealer Exemption: The Securities Division proposes to revise the Canadian broker-dealer registration exemption as set forth at section 608 of the Rules and Regulations Pursuant to the Delaware Securities Act to extend Canadian broker-dealer agents the benefit of the exemption. The proposed revision is consistent with the model regulation as drafted by the North American Securities Administrators Association (“NASAA”). These revisions are being proposed to correct what appears to have been an inadvertent oversight when the exemption was originally promulgated.
2. Registration Requirements for Sole Proprietorships: The Securities Division proposes to revise the registration requirements for broker-dealers and investment advisors to clarify that a person conducting a brokerage or investment advisory business as a sole proprietor need not register an agent or representative with the Securities Commissioner.
Proposed Revisions
Part F. Broker-Dealers, Broker-Dealer Agents, and Issuer Agents
§600 Registration of Broker-Dealers
(a) A person applying for a license as a broker-dealer in Delaware shall make application for such license on Form BD (Uniform Application for Broker-Dealer Registration). Amendments to such applications shall also be made on Form BD.
(b) An applicant who is registered or registering under the Securities Exchange Act of 1934 shall file its application, together with the fee required by Section 7314 of the Act, with the NASD Central Registration Depository ("CRD") and shall file with the Commissioner such other information as the Commissioner may reasonably require.
(c) An applicant who is not registered or registering under the Securities Exchange Act of 1934 shall file its application; the fee required by Section 7314 of the Act; and an audited financial statement prepared in accordance with 17 C.F.R. §240.17a-5(d) with the Commissioner, together with such other information as the Commissioner may reasonably require.
(d) A broker-dealer registered with the Commissioner shall register at least one agent] with the Commissioner. Except for a broker-dealer that is a sole proprietorship or the substantial equivalent, a broker-dealer registered with the Commissioner shall register with the Commissioner at least one broker-dealer agent.
(e) Registration expires at the end of the calendar year. Any broker-dealer may renew its registration by filing with the NASD CRD, or with the Commissioner in the case of a broker-dealer not registered under the Securities Exchange Act of 1934, such information as is required by the NASD, together with the fee required by Section 7314 of the Act.
1 DE Reg 1978 (6/1/98)
§601 Registration of Broker-Dealer Agents
(a) A person applying for a license as a broker-dealer agent in Delaware shall make application for such license on Form U-4 (Uniform Application for Securities Industry Registration or Transfer). Amendments to such application shall also be made on Form U-4.
(b) An applicant for registration as an agent for a broker-dealer that is a member of the NASD shall file his or her application, together with the fee required by Section 7314 of the Act, with the NASD CRD and shall file with the Commissioner such other information as the Commissioner may reasonably require.
(c) Any applicant for registration as an agent for a broker-dealer that is not an NASD member shall file his or her application, together with the fee required by Section 7314 of the Act, with the Commissioner, together with such other information as the Commissioner may reasonably require.
(d) Any applicant for a broker-dealer agent license must also successfully complete the Uniform Securities Agent State Law Examination (Series 63 or 66) administered by the NASD. The Commissioner may waive the exam requirement upon good cause shown.
(e) (d) Registration expires at the end of the calendar year. Any broker-dealer agent may renew its registration by filing with the NASD CRD, or with the Commissioner in the case of a broker-dealer agent employed by a broker-dealer not registered under the Securities Exchange Act of 1934, such information as is required by the NASD, together with the fee required by Section 7314 of the Act.
1 DE Reg 1978 (6/1/98)
§608 Registration Exemption for Certain Canadian Broker-Dealers
(a) A Canadian broker-dealer which meets the conditions of this rule as set forth below shall be exempt from the registration requirement of Section 7313 of the Act.
(b) To be eligible for this exemption, the broker-dealer must be resident in Canada, have no office or other physical presence in Delaware, and comply with the following conditions:
(1) Only effects or attempts to effect transactions in securities with, or for, one or more of the following;
(i) A person from Canada who is temporarily present in Delaware, with whom the Canadian broker-dealer had a bona fide business-client relationship before the person entered Delaware;
(ii) A person from Canada who is present in Delaware, whose transactions are in a self-directed tax advantaged retirement plan in Canada of which the person is the holder or contributor; or
(iii) A "U.S. institutional investor" or a "major U.S. institutional investor" to the extent permitted by SEC Reg. §240.15a-6 (17 CFR §240.15a-6); As otherwise permitted by the Act; and
(2) Is registered in its home province or territory, and a member in good standing of a self-regulatory organization or stock exchange in Canada;
(3) Files with the Securities Commissioner a notice in the form of the current application required by the jurisdiction in which its head office is located;
(4) Files with the Securities Commissioner a consent to service of process in a form which complies with the requirements of Section 7327 of the Act.
(5) Discloses to its clients in Delaware that it is not subject to the full regulatory requirements of the Act; and
(6) Is not in violation of Sections 7303 or 7316 of the Act or any rules promulgated thereunder.
(c) Exempt transactions. Offers or sales of any security effected by a broker-dealer who is exempt from registration under this Regulation are exempt from the registration requirements of Section 7304 of the Act and the filing requirements of Section 7312 of the Act.
(d) Agent exemption: An agent who represents a Canadian broker-dealer who exempt from registration under this Regulation is also exempt from the registration requirement of Section 7313 of the Act, provided such agent maintains his or her provincial or territorial registration in good standing.
§610 Examination Requirement
An individual applying to be registered as a broker-dealer or a broker-dealer agent under the Act must successfully complete the Uniform Securities Agent State Law Examination (Series 63 or 68) administered by the NASD. The Commissioner may waive the exam requirement upon good cause shown.
Part G. Investment Advisers and Investment Adviser Representatives
§700 Registration of Investment Advisors
(a) A person applying for a license as an investment adviser in Delaware shall make application for such license on Form ADV (Uniform Application for Investment Adviser Registration under the Investment Advisers Act of 1940). Amendments to such application shall also be made on Form ADV.
(b) The applicant shall file the following items with the Commissioner: (i) the application on Form ADV; (ii) the fee required by Section 7314 of the Act; (iii) a balance sheet prepared in accordance with Schedule G of Form ADV; (iv) a list of all investment adviser representatives employed by the investment adviser; and (v)proof of compliance with Rule 710 by filing an Investment Adviser Affidavit available at http://www.state.de.us/securities or by contacting the Division of Securities; and (vi) such other information as the Commissioner may reasonably require.
(c) Registration expires at the end of the calendar year. Any investment adviser may renew its registration by filing with the Commissioner an updated Form ADV, together with the fee required by Section 7314 of the Act and a list of all investment adviser representatives employed by the investment adviser.
(d) Every investment adviser must have at least one investment adviser representative registered with the Commissioner to obtain or to maintain its license as an investment adviser.
(d) Except for an investment adviser that is a sole proprietorship or the substantial equivalent, an investment adviser registered with the Commissioner shall register with the Commissioner at least one investment adviser representative.
4 DE Reg 510 (9/1/00)