WASHINGTON — Washington early this month became the third state to move toward regulating adviser designations when it issued two concept releases asking for public comments on the issue.
The releases, issued July 6, allow an indefinite comment period on whether the Evergreen State should adopt rules to clarify that anyone using a professional designation implying
financial planning expertise would have to be registered as an investment adviser.
The releases also ask for comment on whether the state’s rules should prohibit misleading use of professional designations such as “senior adviser.”
Scope is broadened
The July 6 releases broaden the scope of the state’s inquiry into adopting new rules on the matter. A release issued in April dealt only with “senior adviser” designations that have been proliferating in recent years. Many securities regulators have expressed concern that such designations, which are often awarded with little training, could mislead elderly investors.
“We’re now seeing new designations,” said Mike Stevenson, director of securities in the Department of Financial Institutions in Olympia.
Mortgage brokers who help people get loans, in particular, are “calling themselves things to help people get mortgages, but they also are indicating they may be helping people with finances and investments,” Mr. Stevenson said. “There’s a great deal of activity in that area.”
The mortgage brokerage industry has grown over the past five years, Mr. Stevenson said. “That’s the reason we broadened it … to take a look at that area, as well,” he said.
State securities officials also are seeing the use of financial adviser-like designations in connection with advertising for seminars, said Suzanne Sarason, program manager in Washington’s securities division.
Regs stipulate
The state’s securities regulations stipulate that anyone holding themselves out to be a financial planner or adviser must be registered as an investment adviser.
The next step would be for the securities division to issue proposed rules. The state’s rulemaking process takes at least six months after a proposal is made.
“The rules can focus on names that come into vogue,” Mr. Stevenson said.
In addition to possible rules concerning the use of financial planning designations, a second concept release asked for comments on whether it should amend its rules to clarify that misleading use of professional designations is prohibited.
Nebraska this week is set to approve more designations that financial advisers can use, said Jack Herstein, assistant director of the securities bureau in the Department of Banking and Finance in Lincoln.
Nebraska began requiring advisers to use only approved designations last January, “based on the issue of the alphabet soup out there,” he said. “You can’t tell the horse without the program, so we’re going to put a program together.”
Financial advice designations must be approved to be used in advertising or on business cards and letterheads. Other states have been in contact with him to find out about the program, Mr. Herstein said.
So far, the state has approved the use of certified financial planner, chartered financial consultant, chartered life underwriter, chartered financial analyst, personal financial specialist, chartered investment counselor, financial services specialist and life underwriter training council fellow.
Tough rule in Massachusetts
In June, Massachusetts finalized a regulation making it illegal to use unaccredited senior advisory designations.
The North American Securities Administrators Association Inc. in Washington, formed a special committee on senior designations in January to develop possible guidelines governing senior designations. NASAA hopes to have a proposed model rule or law out this fall, said a spokesman, Bob Webster.
The Denver-based Financial Planning Association supports “looking at the proliferation of misleading titles that could affect investor protection,” said Duane Thompson, managing director of the group’s office in Washington.
However, “We hope the states don’t rush to seek individual solutions without waiting first to see what NASAA comes out with,” he said.
