Nebraska Proposes Amendments to its Investment Adviser, Broker Dealer and Securities Registration Rules

Nebraska has proposed multiple changes to its securities laws, including changes to investment adviser registration requirements, changes related to broker dealers and agents, and changes relating to securities registration procedures.

As the proposed changes relate to investment advisers, Nebraska proposes to eliminate the Form IAR and to substitute registration through the CRD/IARD system.  An original application for registration would be required to contain Form ADV, Part 2 for the firm and a brochure supplement for each investment adviser representative.  An original application would also be required to contain copies of all other promotional or disclosure literature expected to be provided to clients and perspective clients in Nebraska.  The proposed rule would eliminate from the registration renewal requirements, the current requirements of submission of Form IAR and the promotional and disclosure literature.  The rules would align Nebraska with the annual updating amendment requirements of other states, by requiring submission of annual updating amendments to Form ADV within 90 days of the end of the fiscal year.  Additionally, the rule would require firms to submit other-than-annual amendments to Form ADV as required by the Form ADV instructions.

The proposed rule would also require brochure delivery to clients in a manner consistent with the requirements of most other states.  For example, delivery of Part 2 and a brochure supplement for each individual that provides investment advice and has direct contact with the client, or exercises discretion over the client’s assets in Nebraska either at the time of entering into an advisory contract or within 48 hours before entering into the contract.  If the delivery is made at the time the contract is entered into, the client must be given the right to terminate the contract without penalty within 5 days of entering into the contract.  Either an annual update or summary of material changes must be delivered to each client within 120 days after the end of the firm’s fiscal year.

The new proposed rules would also require all investment advisers either registered or required to register in Nebraska to create, implement and maintain business continuity and succession plans.  In order to comply with the rule the plan must be based on the facts and circumstances surrounding the adviser’s business model, and must address, at a minimum, books and records protection, recovery and backup, alternative communication systems, office relocation, reassignment of duties of responsible persons in case of death or unavailability, and processes for minimizing service disruptions.

The proposed rules would also require that any applicant for registration submit a complete U.S. citizenship attestation form as well as currently acceptable forms of documentation required in order to prove citizenship and immigration status.  The form required to be submitted would be one of the types of forms currently acceptable by the Department of Homeland Security or the Systematic Alien Verification for Entitlements Program.

The proposed rules also contain substantial provisions relating to custody of client assets, performance-based compensation, fraudulent and unethical practices, and registration and notice filing for investment adviser representatives and federal covered advisers.

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 complex issues that arise in the course of their business, including compliance with federal and state laws and rules. Please visit our website for more information.