New York State Attorney General Letitia A. James delivered remarks at a December 2019 program  of the New York City Bar Association. (Photo by David Handschuh/NYLJ).

New York Attorney General Letitia James on Monday announced a proposed rule change that would allow investment professionals to file registration documents through a national registry, as the state looks to streamline oversight procedures in response to the coronavirus pandemic.

In a statement, James said the proposal would allow registration statements to be filed with the North American Association of Securities Administrators' electronic filing depository system, instead of through her office's Investor Protection Bureau. The new approach, James said, was meant to bring New York's registration procedures more in line with the federal securities regime and clear up "industry confusion when it comes to certain registration requirements."

Though her office had been considering the new proposal before the coronavirus outbreak, James said the deepening crisis, in New York and across the country, had spurred the state to take action.

"The proliferation of scams and frauds related to COVID-19 make it more important than ever for New Yorkers to know who they are dealing with, and these rules will do exactly that by expanding the registration and tracking of individual investment advisers," she said. "Ultimately, these rule changes will increase our use of technology, clean up decades of industry confusion, and enhance our ability to prevent exploitation of New Yorkers in the investment industry."

According to the statement, current state regulations have failed to keep pace with  developments in state and federal securities regulation since the National Securities Markets Improvement Act was enacted in 1996.

The proposed revisions, James said, would require certain notice filings for federal "covered securities" being sold in New York through the NASAA's national registry. Under the revised regulations, the IPB will require that dealers file Form NF, Form D, and the Uniform Notice Filing for Tier 2 Securities directly with the state.

"Such registration will close gaps in nationwide regulation efforts which in certain cases, fail to connect investment adviser representatives with their past record in the securities industry. The complete record of these individual's records is necessary to protect the public and is maintained in every other state," according to a summary of the revised regulations.

The revisions also include a new bookkeeping requirement that investment advisers registered with the state take reasonable steps to verify the "accredited investor" and "qualified client" status of any client, including making and maintaining documents that are used in the course of verification.

James' office said it expects its proposal to be published in the state register on April 15, with a 60-day comment period under the New York State Administrative Procedure Act.

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