1. The person is engaged by the investment adviser to act as an intermediary for the payment of fees, expenses, and capital withdrawals from a pooled investment.
SECTION 113. DFI-Sec 5.035 (4) (c) is renumbered DFI-Sec 5.035 (1e) (d) and DFI-Sec 5.035 (1e) (d) (intro.) and 2., as renumbered, are amended to read:
(d) (intro.) “Qualified custodian" for purposes of sub. (1) subs. (1m) and (4e), includes a broker-dealer registered under ch. 551, Stats., or any of the following independent institutions or entities: 2. A registered futures commission merchant registered under section 4f(a) of the commodity exchange act 7 USC § 6f, holding the client assets in client accounts, but only with respect to clients' funds and security futures, or other securities incidental to transactions in contracts for the purchase or sale of a commodity for future delivery or options thereon.
SECTION 114. DFI-Sec 5.035 (4) (d) is renumbered DFI-Sec 5.035 (1e) (c) and DFI-Sec 5.035 (1e) (c) (intro.), as renumbered, is amended to read:
DFI-Sec 5.035 (1e) (c) “Independent representative" for purposes of this section means a person that satisfies the requirements in each to whom all of the following paragraphs apply:
_Hlk169178287SECTION 115. DFI-Sec 5.04 (2), (3), (5) (b), and (6) (intro.) and (a) are amended to read: DFI-Sec 5.04 (2) Each investment adviser shall file with the division a all of the following:
(a) A copy of any complaint related to its business, transactions, or operations in this state, naming the investment adviser or any of its partners, officers or investment adviser representatives as defendants in any civil or criminal proceeding, or in any administrative or disciplinary proceeding by any public or private regulatory agency, within 20 days of the date the complaint is served on the investment adviser; a.
(b) A copy of any answer or reply to the complaint filed by the investment adviser within 10 days of the date the answer or reply is filed; and a.
(c) A copy of any decision, order, or sanction made with respect to any such proceeding within 20 days of the date the decision, order or sanction is rendered.
(3) (a) (intro.) Except as provided in subs. (2) and (4), each investment adviser shall file do all of the following: (a) File with the division any notice of change of control or change of name, as well as any material change in the information included in the investment adviser's most recent application for registration, in an amendment to Form ADV filed with the division within 30 days of the date of the change.
(b) Each investment adviser shall file File a complete, updated Form ADV with the investment adviser registration depository within 90 days of the end of its fiscal year.
_Hlk169179343(c) Each investment adviser representative and his or her employing investment adviser or federal covered investment adviser shall Along with the investment adviser representative's employing investment adviser or federal covered investment adviser, update information contained in an investment adviser representative's application by filing an amendment to Form U-4 with the central registration depository within 30 days of the date of the event that requires filing of the amendment. (5) (b) Each investment adviser shall notify the division in writing at least not later than 14 days after the closing in this state of any branch office as defined in s. DFI-Sec 1.02 (7), and the notice shall specify the effective date of the closing. (6) (intro.) Each investment adviser shall file a branch office renewal notice annually under par. (a) or (b), as applicable. using one of the following methods:
(a) Through the investment adviser registration depository for registered investment advisers; ,
_Hlk198558928SECTION 116. DFI-Sec 5.05 (1), (2) (intro.) and (b), (3), (4), (5), (7), (8), (11) (intro.), (a), (b), (c), (d) (intro.), (12) (intro.), and (13) are amended to read: DFI-Sec 5.05 (1) Each investment adviser shall establish, maintain, and enforce written supervisory procedures and a system for applying the procedures, which may reasonably be expected to prevent and detect any violations of ch. 551, Stats., and rules and orders thereunder. The procedures shall be tailored to the investment adviser's business model, taking into account the size of the firm, types of services provided, and the number of locations from which the investment adviser operates. The procedures shall include the designation and registration of a number of supervisory employees that is reasonable in relation to the number of its registered investment adviser representatives, offices, and activities in this state. The investment adviser shall also do all of the following: (a) At least annually, review the adequacy of the policies and procedures established under this section and the effectiveness of their implementation.
(b) Designate a supervisory person as the chief compliance officer responsible for administering the investment adviser's policies and procedures.
(2) (intro.) An Except as provided in sub. (3), an investment adviser shall may not enter, extend, or renew any investment advisory contract if the contract:
(b) Fails to provide, in substance, that no assignment of the contract may be made without the consent of the client; or ,
(3) Subsection The prohibition in sub. (2) (a) shall not prohibit does not apply to an investment advisory contract which provides for compensation based upon the total value of a fund averaged over a definite period, or as of definite dates or taken as of a definite date. “Assignment," as used in sub. (2) (b) includes any direct or indirect transfer or hypothecation of an investment advisory contract by the assignor or of a controlling block of the assignor's outstanding voting securities by a security holder of the assignor; but, if the investment adviser is a partnership, no assignment of an investment advisory contract is considered to result from the death or withdrawal of a minority of the members of the investment adviser having only a minority interest in the business of the investment adviser, or from the admission to the investment advisor of one or more members who, after admission, will be only a minority of the members and will have only a minority interest in the business. As used in sub. (2), “investment advisory contract" means any contract or agreement whereby a person agrees to act as investment adviser or to manage any investment or trading account for a person other than persons specified under s. 551.403 (2), Stats., or s. DFI-Sec 5.12 5.13. (4) An investment adviser shall may not enter any contract with a client if the contract contains any condition, stipulation, or provision binding the client to waive any rights under ch. 551, Stats., or any rule or order thereunder. Any such condition, stipulation, or provision is void. (7) Every registered investment adviser shall employ at its principal office or designated office of supervision in accordance with s. DFI-Sec 5.03 (1), at least one person designated in writing on the form prescribed in s. DFI-Sec 9.01 (1) (b) and filed with the division to act in a supervisory capacity who is registered as an investment adviser representative in this state and has satisfied the supervisory examination requirement in s. DFI-Sec 5.01 (5). If a registered investment adviser is not in compliance with the requirements of this paragraph, it has 45 days from the first date of noncompliance to meet the requirements of this paragraph. (8) (a) Unless otherwise Except as provided in this subsection, each investment adviser, or investment advisor representative, who will provide advisory services shall furnish to each client and prospective client a the current firm brochure and one or more the current version of any relevant supplements as required by this subsection. The brochure and any required supplement shall contain all information required by Part 2 of Form ADV and such other information as the division may require.
_Hlk169275196SECTION 118. DFI-Sec 5.05 (8) (e) 1. and 3., (11) (intro.), (a), (b), (c), (d) (intro.), (12) (intro.), and (13) are amended to read: DFI-Sec 5.05 (8) (e) 1. Each investment adviser that is a sponsor of a wrap fee program shall furnish to a client or prospective client in lieu of the brochure required in par. (b) (a), a wrap fee brochure containing all information required by Form ADV. All information in a wrap fee brochure shall be limited to information applicable to wrap fee programs that the investment adviser sponsors. 3. A wrap fee brochure shall not be used in place of any brochure supplement that the investment adviser is required to furnish under par. (b) 1 (a). (11) (intro.) Each investment adviser which by contract, agreement or other means provides investment advisory services on the premises of a financial institution that is not registered as an investment adviser shall do all of the following:
(a) Perform the investment advisory services within a specific area on the premises of the financial institution designated by agreement between the investment adviser and the financial institution. Nothing in this paragraph prohibits the financial institution from carrying out other activities within the designated area, provided that no promotional signs or materials shall be displayed within the designated area other than those relating to the investment advisory services; .
(b) Prominently display the identity of the registered investment adviser in the area on the premises of the financial institution designated under par. (a) ; . (c) 1. Disclose the identity of the registered investment adviser in, without limitation because of enumeration, all advertising, correspondence, business , including in at least all of the following areas:
a. Advertising.
b. Business cards, promotional .
c. Promotional materials and records relating to the investment adviser's services provided on the premises of the financial institution.
2. Materials described in this paragraph may not display the financial institution's name or logotype in a manner that would mislead clients as to the financial institution's role in connection with the investment advisory services being offered by the investment adviser. For purposes of this paragraph, if the investment adviser's name is no less prominent in the materials than the name of the financial institution in the size, style or color of type or in the placement or by use of logotypes, the materials are presumed to be not misleading.
(d) Establish written supervisory procedures and a system for applying the procedures. The procedures shall comply with s. DFI-Sec 5.05 (1) and shall be designed to accomplish certain supervisory functions, including but not limited to at least all of the following: (12) No investment adviser or its investment adviser representative, in connection with a telephone or electronic solicitation, shall may:
(13) Each investment adviser shall provide clients with a written notification or invoice of itemizing fees due for investment advisory services. The notification or invoice shall specify the time period covered by the fee for ongoing supervisory or investment management services or shall detail the services rendered for preparation of financial plans or analyses. Itemization of the fee for investment services includes the formula used to calculate the fee, the amount of assets under management on which the fee is based, and the time period covered by the fee.
_Hlk198559485SECTION 119. DFI-Sec 5.06 (intro.), (2), (3), (4), (5), (9), and (10) are amended to read: _Hlk169282520DFI-Sec 5.06 (intro.) Except as otherwise provided in sub. (13), the following are deemed DFI-Sec 5.065 (1), “dishonest or unethical business practices" or “taking unfair advantage of a client" by an investment adviser or an investment adviser representative under s. 551.412 (4) (m), Stats., without limiting those terms to the practices specified in this section are deemed to include the following: _Hlk169277891(2) Placing an order to purchase or sell a security for the account of a client upon instructions of a third party without first having obtained written third party trading authorization from the client; . (3) Inducing trading in a client's account that is excessive in size or frequency in view of the financial resources and character of the account; .
(4) Recommending to a client the purchase, sale or exchange of any security without reasonable grounds to believe that the recommendation is suitable for the client on the basis of information furnished by the client after reasonable inquiry concerning the client's investment objectives, financial situation and needs, and any other information known by the investment adviser;.
(5) Placing an order to purchase or sell a security for the account of a client without authority to do so;.
(9) Placing an order for a client, or recommending that the client place an order, to purchase or sell a security through a broker-dealer or agent not registered under ch. 551, Stats., unless the client is a person described in s. 551.403 (2) (a), Stats., or s. DFI-Sec 5.12 5.13. (10) Recommending to a client that the client engage the services of a broker-dealer, agent or investment adviser not registered under ch. 551, Stats., unless the client is a person described in s. 551.403 (2) (a), Stats., or s. DFI-Sec 5.12 5.13. _Hlk198559552SECTION 120. DFI-Sec 5.06 (13) is renumbered DFI-Sec 5.065 (1) and, as renumbered, is amended to read: DFI-Sec 5.065 Application of prohibitions, distribution of materials, definitions. (1) The subsections of this section shall apply Section DFI-Sec 5.06 applies to an investment adviser representative of a federal covered investment adviser only to the extent permitted by section 203 (b) (2) of the investment advisers act Investment Advisers Act of 1940, and only to the extent the prohibited conduct involves fraud or deceit. _Hlk198559610SECTION 121. DFI-Sec 5.06 (16) (intro.) and (a) are amended to read: DFI-Sec 5.06 (16) (intro.) Failing to disclose to clients in writing before any advice is rendered any material conflict of interest relating to the investment adviser, investment adviser representative or federal covered investment adviser, or any of its employees, or affiliated persons which could reasonably be expected to impair the rendering of unbiased and objective advice including but not limited to any of the following:
(a) Compensation arrangements connected with investment advisory services to clients which are in addition to compensation from such clients for such services; and.
_Hlk198559673SECTION 122. DFI-5.06 (17) (a) is renumbered DFI-Sec 5.06 (17) and, as renumbered, is amended to read: DFI-Sec 5.06 (17) While acting as principal for its own advisory account, to knowingly sell selling any security to or purchase purchasing any security from a client, or while acting as broker-dealer for a person other than the client, to knowingly effect effecting any sale or purchase of any security for the account of the client, without disclosing to the client in writing before the completion of the transaction the capacity in which it is acting and obtaining the consent of the client to the transaction.
_Hlk198559831SECTION 123. DFI-Sec 5.06 (17) (b) to (e) are renumbered DFI-Sec 5.065 (2) to (5), and DFI-Sec 5.065 (2), (3) (intro.), (a), (b), and (c), (4), and (5) (intro.), as renumbered, are amended to read: DFI-Sec 5.065 (2) The prohibitions of this subsection shall in DFI-Sec 5.06 (17) do not apply to any transaction with a client of a broker-dealer if the broker-dealer is not acting as an investment adviser in relation to the transaction.
(3) The prohibitions of this subsection shall in DFI-Sec 5.06 (17) do not apply to any transaction with a client of a broker-dealer if the broker-dealer acts as an investment adviser solely:
(a) By means of publicly distributed written materials or publicly made oral statements; .
(b) By means of written materials or oral statements not purporting to meet the objectives or needs of specific individuals or accounts; .
(c) Through the issuance of statistical information containing no expressions of opinion as to the investment merits of a particular security; or.
(4) Publicly With regard to DFI-Sec 5.06 (17), publicly distributed written materials or publicly made oral statements shall disclose that, if the purchaser of the advisory communication uses the investment adviser's services in connection with the sale or purchase of a security which is a subject of the communication, the investment adviser may act as principal for its own account or as agent for another person. Compliance by the investment adviser with the foregoing disclosure requirement shall does not relieve it of any other disclosure obligations under ch. 551, Stats. (5) In With regard to DFI-Sec 5.06 (17), in this subsection section:
_Hlk198559908SECTION 124. DFI-Sec 5.06 (19) (intro.) and (b) (intro.) are amended to read: DFI-Sec 5.06 (19) (intro.) Publishing, circulating, or distributing any advertisement which directly or indirectly does any one of the following:
(b) (intro.) Refers to past specific recommendations of the investment adviser, investment adviser representative or federal covered investment adviser that were or would have been profitable to any person; except that an investment adviser or investment adviser representative may furnish or offer to furnish a list of all recommendations made by the investment adviser, investment adviser representative or federal covered investment adviser within the immediately preceding period of not less than one year if the advertisement or list also includes both all of the following:
SECTION 125. DFI-Sec 5.06 (19) (g) is renumbered DFI-Sec 5.065 (6), and DFI-Sec 5.065 (6) (intro.), as renumbered, is amended to read:
DFI-Sec 5.065 (6) (intro.) In this subsection DFI-Sec 5.06 (19), the term “advertisement" includes any notice, circular, letter, or other written communication addressed to more than one person, or any notice or other announcement in any electronic or paper publication, by radio or television, or by any medium, that offers any one of the following:
_Hlk198560083SECTION 126. DFI-Sec 5.06 (25) (intro.) is renumbered DFI-Sec 5.066 (1) and, as renumbered, is amended to read: DFI-Sec 5.066 Additional prohibited conduct. (1) Paying a cash fee or any other economic benefit, directly or indirectly, in connection with solicitation activities is a "dishonest or unethical business practice" or “taking unfair advantage of a client" by an investment adviser or an investment adviser representative under s. 551.412 (4) (m), Stats., unless the requirements of pars. (a) through (d) are sub. (2) are met. _Hlk198560186SECTION 127. DFI-Sec 5.06 (25) (a) to (e) are renumbered DFI-Sec 5.066 (2) (a) to (e), and DFI-Sec 5.066 (2) (b) (intro.), 1., and 2., (c), (d) (intro.) and 1. to 5., and (e), as renumbered, are amended to read: DFI-Sec 5.066 (2) (b) The cash fee or any other economic benefit is paid by the investment adviser with respect to solicitation activities that are impersonal in nature in that they are provided solely by means of one of the following means:
_Hlk1692830581. Written material or oral statements which do not purport to meet the objectives or needs of the specific client; or . 2. Statistical information containing no expressions of opinions as to the merits of particular securities or investment advisers; or .
(c) The cash fee or any other economic benefit is paid pursuant to a written agreement to which the investment adviser is a party, and all of the following conditions are met:
1. The written agreement; does all of the following:
a. Describes the solicitation or referral activities to be engaged in by the solicitor on behalf of the investment adviser and the cash fee or any other economic benefit to be received for such activities; and .
b. Contains an undertaking by the solicitor to perform its duties under the agreement in a manner consistent with the instructions of the investment adviser and the provisions of ch. 551, Stats., and rules there under; and thereunder. _Hlk169283844c. Requires that the solicitor, at the time of any solicitation or referral activities for which a cash fee or any other economic benefit is paid or to be paid by the investment adviser, provide the client with a current copy of the investment adviser's disclosure document required under s. DFI-Sec 5.05 (8) and a separate disclosure statement as described in par. (d), either in paper or electronic format; and . 2. The investment adviser receives from the client, prior to or at the time of entering into any written investment advisory contract, a signed and dated acknowledgement of receipt of the investment adviser's written disclosure statement and the solicitor's written disclosure document; and .
3. The investment adviser makes a bona fide effort and has a reasonable basis for believing that the solicitor has complied with the agreement; and .
4. (cm) The requirements in subds. 1., 2. and 3. shall par. (c) do not apply if the solicitor is any of the following: a. 1. A partner, officer, director or employee of such investment adviser; or .
b. 2. A partner, officer, director or employee of a person that controls, is controlled by, or is under common control with such investment adviser, provided the status of the solicitor is disclosed to the client at the time of the solicitation or referral.
(d) The separate written disclosure document required to be furnished by the solicitor to the client pursuant to par. (c) 1. c. shall contain all of the following information:
