BEFORE THE STATE AUDITOR AND COMMISSIONER OF SECURITIES
OF THE STATE OF MONTANA
In the matter of the amendment of ARM 6.10.126
, pertaining to Unethical Practices by Broker-Dealers and Salesmen Defined, and the adoption of NEW RULE I pertaining to Filing Requirements for Transactional Exemption
NOTICE OF PUBLIC HEARING ON PROPOSED AMENDMENT AND ADOPTION
TO: All Concerned Persons
1. On August 8, 2008, at 10:00 a.m., the State Auditor and Commissioner of Securities will hold a public hearing in the 2nd floor conference room of the State Auditor's Office, 840 Helena Ave., Helena, Montana, to consider the proposed amendment and adoption of the above-stated rules.
2. The State Auditor and Commissioner of Securities will make reasonable accommodations for persons with disabilities who wish to participate in this rulemaking process or need an alternative accessible format of this notice. If you require an accommodation, contact the department no later than 5:00 p.m., August 1, 2008, to advise us of the nature of the accommodation that you need. Please contact Darla Sautter, State Auditor's Office, 840 Helena Ave., Helena, Montana, 59601; telephone (406) 444-2726; TDD (406) 444-3246; fax (406) 444-3497; or e-mail firstname.lastname@example.org.
3. The rule as proposed to be amended provides as follows, new matter underlined, deleted matter interlined:
6.10.126 "UNETHICAL PRACTICES" BY BROKER-DEALERS AND SALESMEN DEFINED (1) through (2)(e) remain the same.
(f) the use of a senior specific certification or designation by any person in connection with the offer, sale, or purchase of securities, or the provision of advice as to the value of or the advisability of investing in, purchasing, or selling securities, either directly or indirectly or through publications or writings, or by issuing or promulgating analyses or reports relating to securities, that indicates or implies that the user has special certification or training in advising or servicing senior citizens or retirees, in such a way as to mislead any person shall be a dishonest and unethical practice in the securities business within the meaning of 30-10-201(13)(g), MCA. The prohibited use of such certifications or professional designation includes, but is not limited to, the following:
(i) use of a certification or professional designation by a person who has not actually earned or is otherwise ineligible to use such certification or designation;
(ii) use of a nonexistent or self-conferred certification or professional designation;
(iii) use of a certification or professional designation that indicates or implies a level of occupational qualifications obtained through education, training, or experience that the person using the certification or professional designation does not have; and
(iv) use of a certification or professional designation that was obtained from a designating or certifying organization that:
(A) is primarily engaged in the business of instruction in sales and/or marketing;
(B) does not have reasonable standards or procedures for assuring the competency of its designees or certificants;
(C) does not have reasonable standards or procedures for monitoring and disciplining its designees or certificants for improper or unethical conduct; or
(D) does not have reasonable continuing education requirements for its designees or certificants in order to maintain the designation or certificate.
(g) there is a rebuttable presumption that a designating or certifying organization is not disqualified solely for purposes of (2)(f)(iv), when the organization has been accredited by:
(i) The American National Standards Institute;
(ii) The National Commission for Certifying Agencies; or
(iii) an organization that is on the United States Department of Education's list entitled "Accrediting Agencies Recognized for Title IV Purposes" and the designation or credential issued therefrom does not primarily apply to sales and/or marketing.
(h) in determining whether a combination of words (or an acronym standing for a combination of words) constitutes a certification or professional designation indicating or implying that a person has special certification or training in advising or servicing senior citizens or retirees, factors to be considered shall include:
(i) use of one or more words such as "senior," "retirement," "elder," or like words, combined with one or more words such as "certified," "registered," "chartered," "adviser," "specialist," "consultant," "planner," or like words, in the name of the certification or professional designation; and
(ii) the manner in which those words are combined.
(i) for purposes of this rule, a senior certification or professional designation does not include a job title within an organization that is licensed or registered by a state or federal financial services regulatory agency, when that job title:
(i) indicates seniority or standing within the organization; or
(ii) specifies an individual's area of specialization within the organization.
(j) for purposes of (2)(i), financial services regulatory agency
includes, but is not limited to, an agency that regulates broker-dealers, investment advisers, or investment companies as defined under the Investment Company Act of 1940.
(k) nothing in these rules shall limit the administrator's authority to enforce existing provisions of law;
(f) and (g) remain the same, but are renumbered (l) and (m).
AUTH: 30-10-107, MCA
IMP: 30-10-201, MCA
4. The rule as proposed to be adopted provides as follows:
NEW RULE I FILING REQUIREMENTS FOR TRANSACTIONAL EXEMPTION PURSUANT TO 30-10-105(15), MCA (1) A request for a transactional exemption pursuant to 30-10-105(15), MCA, shall include the following:
(a) a letter of request explaining why an exemption would serve the purposes of 30-10-102, MCA;
(b) a U-2 consent to service of process form; and
(c) a fee of $50.
(2) A transactional exemption granted pursuant to a request under (1) is effective for one year following the date of the commissioner's granting of the exemption request. Prior to the expiration date of the exemption, an exemption may be renewed by filing a $50 fee with the commissioner. A renewed exemption shall be effective for one year commencing upon the expiration of the exemption filing being renewed.
AUTH: 30-10-105, MCA
IMP: 30-10-209, MCA
STATEMENT OF REASONABLE NECESSITY: It is necessary to adopt ARM 6.10.126(2)(f) through 6.10.126(2)(j) to promote the public interest, and for the protection of investors. They are consistent with the purposes of the policy and provisions of Title 30, chapter 10, parts 1 through 3, MCA.
ARM 6.10.126(2)(f) is necessary to define specific types of activity that are prohibited by 30-10-201(13)(g), MCA. Recently, NASSAA member states that the SEC (federal regulator) and FinRA (self-regulating organization) have seen an increase in the use of unsupported and unaccredited senior designations as a means to commit fraudulent acts against senior investors. The agency finds this rule a necessary tool in its efforts to curb the fraudulent use of such designations.
ARM 6.10.126(2)(g) is necessary to define rebuttable presumptions against the prohibited activity described in NEW RULE I, placing a limitation on the agency to avoid oppressive use of the agency's regulatory powers while allowing appropriate regulation of persons using senior designations unlawfully.
ARM 6.10.126(2)(h) is necessary to define criteria specific to the unlawful designations in order to avoid any vagueness or ambiguity with regard to what terms and what actions constitute an unlawful senior designation.
ARM 6.10.126(2)(i) is necessary to clarify that the definition of unlawful "senior designations" is limited to those that are used to mislead or misrepresent a person's ability to perform certain tasks associated with the securities industry.
ARM 6.10.126(2)(k) is necessary to clarify that the rule is not an unlawful limitation on the State Auditor in the capacity of ex-Officio Securities Commissioner.
NEW RULE I is necessary to promote the public interest, for the protection of investors, and they are consistent with the purposes of the policy and provisions of Title 30, chapter 10, part 1 through 3, MCA. The addition of this rule to the Securities Department's rules is required by the Legislative Auditor to inform the public regarding the fees and other requirements to effect a transactional exemption pursuant to 30-10-105(15), MCA.
5. Concerned persons may submit their data, views, or arguments concerning the proposed action either orally or in writing at the hearing. Written data, views, or arguments may also be submitted to Roberta Cross Guns, Staff Attorney, State Auditor's Office, 840 Helena Ave., Helena, Montana, 59601; telephone (406) 444-2040; fax (406) 444-5558; or e-mail email@example.com, and must be received no later than 5:00 p.m., August 15, 2008.
6. Roberta Cross Guns, State Auditor's Office, has been designated to preside over and conduct this hearing.
7. The department maintains a list of concerned persons who wish to receive notices of rulemaking actions proposed by this agency. Persons who wish to have their name added to the list shall make a written request that includes the name and mailing address of the person to receive notices and specifies for which program the person wishes to receive notices. Such written request may be mailed or delivered to Darla Sautter, 840 Helena Ave., Helena, Montana 59601; telephone (406) 444-2726; TDD (406) 444-3246; fax (406) 444-3497; or e-mail firstname.lastname@example.org, or may be made by completing a request form at any rules hearing held by the department.
8. An electronic copy of this Proposal Notice is available through the Secretary of State's web site at http://sos.mt.gov/ARM/Register. The Secretary of State strives to make the electronic copy of the Notice conform to the official version of the Notice, as printed in the Montana Administrative Register, but advises all concerned persons that in the event of a discrepancy between the official printed text of the Notice and the electronic version of the Notice, only the official printed text will be considered. In addition, although the Secretary of State works to keep its web site accessible at all times, concerned persons should be aware that the web site may be unavailable during some periods, due to system maintenance or technical problems.
9. The bill sponsor notice requirements of 2-4-302, MCA, do not apply.
/s/ Christina L. Goe /s/ Janice S. VanRiper
Christina L. Goe Janice S. VanRiper
Rule Reviewer Deputy State Auditor
Certified to the Secretary of State July 7, 2008.