Institute Sends Letter to NASAA Re Proposed Examination for Investment Adviser Representatives

Washington, DC, April 28, 1998 - The North American Securities Administrators Association (NASAA) is in the process of developing a competency examination for those investment adviser representatives who remain subject to state registration authority. To date, two public meetings have been held at which representatives of industry, including the Institute, have expressed concern with NASAA's plan to develop an objective, "one-size-fits-all" examination to assess the competency of all investment adviser representatives. Notwithstanding the expressed concerns, the Committee continues to proceed with the development of the examination.

In anticipation of the NASAA Spring Conference, which will be held the first week of May and at which the NASAA Investment Advisers Competency Examination Committee is expected to provide an update to the members of NASAA on the development of the examination, the Institute sent a letter to the NASAA Committee, the NASAA Board of Directors, and to each of the members of NASAA to reiterate our concerns. As discussed in the letter, the Institute opposes the Committee's current initiative because:

Competency to render investment advice cannot be adequately assessed through an objective examination;
It is inappropriate to utilize a "one-size-fits-all" examination to test the competency of all persons-from solicitors to full-service financial planners-that fall within the rubric of "investment adviser representative"; and
A need for the examination has not been demonstrated.

The Institute's letter notes that NASAA abandoned a similar initiative in 1984 based upon these same concerns.

According to the letter, if NASAA's concern is with investor protection, the Institute believes investors would be better served by the states more effectively overseeing state-registered investment advisers and their representatives through more frequent and thorough inspections and being more rigorous in investigating customer complaints and bringing enforcement actions to redress violations of the law.