§ 411.  POSTREGISTRATION REQUIREMENTS.

(a) [Financial requirements.] Subject to Section 15(h) of the Securities Exchange Act of 1934 (15 U.S.C. Section 78o(h)) or Section 222 of the Investment Advisers Act of 1940 (15 U.S.C. Section 80b-22), a rule adopted or order issued under this [Act] may establish minimum financial requirements for broker-dealers registered or required to be registered under this [Act] and investment advisers registered or required to be registered under this [Act].

See WAC 460-24A-170

§ 31.  POSTREGISTRATION REQUIREMENTS. 

   (1) Financial requirements.  Subject to Section 15(h) of the Securities Exchange Act of 1934 (15 U.S.C. Sec. 78o(h)) or Section 222 of the Investment Advisers Act of 1940 (15 U.S.C. Sec. 80b-22), a rule adopted or order issued under this chapter may establish minimum financial requirements for broker-dealers registered or required to be registered under this chapter and investment advisers registered or required to be registered under this chapter.

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(b) [Financial reports.] Subject to Section 15(h) of the Securities Exchange Act of 1934 (15 U.S.C. Section 78o(h)) or Section 222(b) of the Investment Advisers Act of 1940  (15 U.S.C. Section 80b-22), a broker-dealer registered or required to be registered under this [Act] and an investment adviser registered or required to be registered under this [Act] shall file such financial reports as are required by a rule adopted or order issued under this [Act].  If the information contained in a record filed under this subsection is or becomes inaccurate or incomplete in a material respect, the registrant shall promptly file a correcting amendment.

See RCW 21.20.090

§ 31(2).  Financial reports.  Subject to Section 15(h) of the Securities Exchange Act of 1934 (15 U.S.C. Sec. 78o(h)) or Section 222(b) of the Investment Advisers Act of 1940 (15 U.S.C. Sec. 80b-22), a broker-dealer registered or required to be registered under this chapter and an investment adviser registered or required to be registered under this chapter shall file such financial reports as are required by a rule adopted or order issued under this chapter.  If the information contained in a record filed under this subsection is or becomes inaccurate or incomplete in a material respect, the registrant shall promptly file a correcting amendment.

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(c) [Recordkeeping.] Subject to Section 15(h) of the Securities Exchange Act of 1934 (15 U.S.C. Section 78o(h)) or Section 222 of the Investment Advisers Act of 1940 (15 U.S.C. Section 80b-22):

(1) a broker-dealer registered or required to be registered under this [Act] and an investment adviser registered or required to be registered under this [Act] shall make and maintain the accounts, correspondence, memoranda, papers, books, and other records required by rule adopted or order issued under this [Act];

(2) broker-dealer records required to be maintained under paragraph (1) may be maintained in any form of data storage acceptable under Section 17(a) of the Securities Exchange Act of 1934 (15 U.S.C. Section 78q(a)) if they are readily accessible to the administrator; and

(3) investment adviser records required to be maintained under paragraph (1) may be maintained in any form of data storage required by rule adopted or order issued under this [Act].

RCW 21.20.100  Accounts, correspondence, memoranda, papers, books, and other records -- Release of information -- Correction of filed document -- Examination.

(1) Every registered broker-dealer and investment adviser shall make and keep such accounts, correspondence, memoranda, papers, books, and other records, except with respect to securities exempt under RCW 21.20.310(1), which books and other records shall be prescribed by the director by rule or otherwise. The recordmaking and recordkeeping requirements prescribed for a broker-dealer shall not exceed the limitations provided in section 15 of the Securities Exchange Act of 1934. The recordmaking and recordkeeping requirements prescribed for a registered investment adviser shall not exceed the limitations provided in section 222 of the Investment Advisers Act of 1940. All records required to be made and kept by a registered investment adviser shall be preserved for such a period as the director prescribes by rule or otherwise.

(2) With respect to investment advisers, the director may require that certain information be furnished or disseminated as necessary or appropriate in the public interest or for the protection of investors and advisory clients.

(3) If the information contained in any document filed with the director is or becomes inaccurate or incomplete in any material respect, the registrant shall promptly file a correcting amendment unless notification of the correction has been given under RCW 21.20.090.

§ 31(3).  Recordkeeping.  Subject to Section 15(h) of the Securities Exchange Act of 1934 (15 U.S.C. Sec. 78o(h)) or Section 222 of the Investment Advisers Act of 1940 (15 U.S.C. Sec. 80b-22):

(a) A broker-dealer registered or required to be registered under this chapter and an investment adviser registered or required to be registered under this chapter shall make and maintain the accounts, correspondence, memoranda, papers, books, and other records required by rule adopted or order issued under this chapter;

     (b) Broker-dealer records required to be maintained under (a) of this subsection may be maintained in any form of data storage acceptable under Section 17(a) of the Securities Exchange Act of 1934 (15 U.S.C. Sec. 78q(a)) if they are readily accessible to the director; and

(c) Investment adviser records required to be maintained under (a) of this subsection may be maintained in any form of data storage required by rule adopted or order issued under this chapter.

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(d) [Audits or inspections.]  The records of a broker-dealer registered or required to be registered under this [Act] and of an investment adviser registered or required to be registered under this [Act] are subject to such reasonable periodic, special, or other audits or inspections by a representative of the administrator, within or without this State, as the administrator considers necessary or appropriate in the public interest and for the protection of investors.  An audit or inspection may be made at any time and without prior notice.  The administrator may copy, and remove for audit or inspection copies of, all records the administrator reasonably considers necessary or appropriate to conduct the audit or inspection.  The administrator may assess a reasonable charge for conducting an audit or inspection under this subsection.

(4) All the records of a registered broker-dealer or investment adviser are subject at any time or from time to time to such reasonable periodic, special or other examinations by representatives of the director, within or without this state, as the director deems necessary or appropriate in the public interest or for the protection of investors.

§ 31(4).  Audits or inspections.  The records of a broker-dealer registered or required to be registered under this chapter and of an investment adviser registered or required to be registered under this chapter are subject to such reasonable periodic, special, or other audits or inspections by a representative of the director, within or without this state, as the director considers necessary or appropriate in the public interest and for the protection of investors.  An audit or inspection may be made at any time and without prior notice.  The director may copy, and remove for audit or inspection copies of, all records the director reasonably considers necessary or appropriate to conduct the audit or inspection.  The director may assess a reasonable charge for conducting an audit or inspection under this subsection.

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(e) [Custody and discretionary authority bond or insurance.] Subject to Section 15(h) of the Securities Exchange Act of 1934 (15 U.S.C. Section 78o(h)) or Section 222 of the Investment Advisers Act of 1940  (15 U.S.C. Section 80b-22), a rule adopted or order issued under this [Act] may require a broker-dealer or investment adviser that has custody of or discretionary authority over funds or securities of a customer or client to obtain insurance or post a bond or other satisfactory form of security in an amount not to exceed $[___].  The administrator may determine the requirements of the insurance, bond, or other satisfactory form of security.  Insurance or a bond or other satisfactory form of security may not be required of a broker-dealer registered under this [Act] whose net capital exceeds, or of an investment adviser registered under this [Act] whose minimum financial requirements exceed, the amounts required by rule or order under this [Act].  The insurance, bond, or other satisfactory form of security must permit an action by a person to enforce any liability on the insurance, bond, or other satisfactory form of security if instituted within the time limitations in Section 509(j)(2).

.

§ 31(5).  Custody and discretionary authority bond or insurance.  Subject to Section 15(h) of the Securities Exchange Act of 1934 (15 U.S.C. Sec. 78o(h)) or Section 222 of the Investment Advisers Act of 1940 (15 U.S.C. Sec. 80b-22), a rule adopted or order issued under this chapter may require a broker-dealer or investment adviser that has custody of or discretionary authority over funds or securities of a customer or client to obtain insurance or post a bond or other satisfactory form of security.  The director may determine the requirements of the insurance, bond, or other satisfactory form of security.  Insurance or a bond or other satisfactory form of security may not be required of a broker-dealer registered under this chapter whose net capital exceeds, or of an investment adviser registered under this chapter whose minimum financial requirements exceed, the amounts required by rule or order under this chapter.  The insurance, bond, or other satisfactory form of security must permit an action by a person to enforce any liability on the insurance, bond, or other satisfactory form of security if instituted within the time limitations in section 42(10)(b) of this act.

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(f) [Requirements for custody.] Subject to Section 15(h) of the Securities Exchange Act of 1934 (15 U.S.C. Section 78o(h)) or Section 222 of the Investment Advisers Act of 1940 (15 U.S.C. Section 80b-22), an agent may not have custody of funds or securities of a customer except under the supervision of a broker-dealer and an investment adviser representative may not have custody of funds or securities of a client except under the supervision of an investment adviser or a federal covered investment adviser.  A rule adopted or order issued under this [Act] may prohibit, limit, or impose conditions on a broker-dealer regarding custody of funds or securities of a customer and on an investment adviser regarding custody of securities or funds of a client.

See WAC 460-24A-105

§ 31(6).  Requirements for custody.  Subject to Section 15(h) of the Securities Exchange Act of 1934 (15 U.S.C. Sec. 78o(h)) or Section 222 of the Investment Advisers Act of 1940 (15 U.S.C. Sec. 80b-22), a sales agent may not have custody of funds or securities of a customer except under the supervision of a broker-dealer and an investment adviser representative may not have custody of funds or securities of a client except under the supervision of an investment adviser or a federal covered investment adviser.  A rule adopted or order issued under this chapter may prohibit, limit, or impose conditions on a broker-dealer regarding custody of funds or securities of a customer and on an investment adviser regarding custody of securities or funds of a client.

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(g) [Investment adviser brochure rule.] With respect to an investment adviser registered or required to be registered under this [Act], a rule adopted or order issued under this [Act] may require that information or other record be furnished or disseminated to clients or prospective clients in this State as necessary or appropriate in the public interest and for the protection of investors and advisory clients.

See WAC 460-24A-145

§ 31(7).  Investment adviser brochure rule.  With respect to an investment adviser registered or required to be registered under this chapter, a rule adopted or order issued under this chapter may require that information or a record be furnished or disseminated to clients or prospective clients in this state as necessary or appropriate in the public interest and for the protection of investors and advisory clients.

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(h) [Continuing education.] A rule adopted or order issued under this [Act] may require an individual registered under Section 402 or 404 to participate in a continuing education program approved by the Securities and Exchange Commission and administered by a self-regulatory organization or, in the absence of such a program, a rule adopted or order issued under this [Act] may require continuing education for an individual registered under Section 404.

§ 31(8).  Continuing education.  A rule adopted or order issued under this chapter may require an individual registered under section 22 or 24 of this act to participate in a continuing education program approved by the Securities and Exchange Commission and administered by a self-regulatory organization or, in the absence of such a program, a rule adopted or order issued under this chapter may require continuing education for an individual registered under section 24 of this act.

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§412.  DENIAL, REVOCATION, SUSPENSION, WITHDRAWAL, RESTRICTION, CONDITION, OR LIMITATION OF REGISTRATION.

(a) [Disciplinary conditions-applicants.]  If the administrator finds that the order is in the public interest and subsection (d) authorizes the action, an order issued under this [Act] may deny an application, or may condition or limit registration of an applicant to be a broker-dealer, agent, investment adviser, or investment adviser representative, and, if the applicant is a broker-dealer or investment adviser, of a partner, officer, director, or person having a similar status or performing similar functions, or a person directly or indirectly in control, of the broker-dealer or investment adviser.

(b) [Disciplinary conditions – registrants.]  If the administrator finds that the order is in the public interest and subsection (d) authorizes the action, an order issued under this [Act] may revoke, suspend, condition, or limit the registration of a registrant and, if the registrant is a broker-dealer or investment adviser, of a partner, officer, director, or person having a similar status or performing similar functions, or a person directly or indirectly in control, of the broker-dealer or investment adviser.  However, the administrator may not:

(1) institute a revocation or suspension proceeding under this subsection based on an order issued under a law of another State that is reported to the administrator or a designee of the administrator more than one year after the date of the order on which it is based; or

            (2) under subsection (d)(5)(A) or (B), issue an order on the basis of an order issued under the securities act of another State unless the other order was based on conduct for which subsection (d) would authorize the action had the conduct occurred in this State.

(c) [Disciplinary penalties – registrants.] If the administrator finds that the order is in the public interest and subsection (d)(1) through (6), (8), (9), (10), or (12) and (13) authorizes the action, an order under this [Act] may censure, impose a bar, or impose a civil penalty in an amount not to exceed a maximum of $[___] for a single violation or $[__] for more than one violation, on a registrant, and, if the registrant is a broker-dealer or investment adviser, a partner, officer, director, or person having a similar status or performing similar functions, or a person directly or indirectly in control, of the broker-dealer or investment adviser.

RCW 21.20.110  Director may deny, suspend, revoke, restrict, condition, or limit any application or registration -- Director may censure or fine registrant -- Grounds -- Procedures -- Costs -- Accounting.

 (1) The director may by order deny, suspend, revoke, restrict, condition, or limit any application or registration of any broker-dealer, salesperson, investment adviser representative, or investment adviser; or censure or fine the registrant or an officer, director, partner, or person performing similar functions for a registrant; if the director finds that the order is in the public interest and that the applicant or registrant or, in the case of a broker-dealer or investment adviser, any partner, officer, director, or person performing similar functions:

§ 32.  DENIAL, REVOCATION, SUSPENSION, WITHDRAWAL, RESTRICTION, CONDITION, OR LIMITATION OF REGISTRATION. 

   (1) Disciplinary conditions - applicants.  If the director finds that the order is in the public interest and subsection (4) of this section authorizes the action, an order issued under this chapter may deny an application, or may condition or limit registration of an applicant to be a broker-dealer, sales agent, investment adviser, or investment adviser representative, and, if the applicant is a broker-dealer or investment adviser, of a partner, officer, director, or person having a similar status or performing similar functions, or a person directly or indirectly in control of the broker-dealer or investment adviser.

   (2) Disciplinary conditions - registrants.  If the director finds that the order is in the public interest and subsection (4) of this section authorizes the action, an order issued under this chapter may revoke, suspend, condition, or limit the registration of a registrant and if the registrant is a broker-dealer or investment adviser, of a partner, officer, director, or person having a similar status or performing similar functions, or a person directly or indirectly in control of the broker-dealer or investment adviser.  However, the director may not:

       (a) Institute a revocation or suspension proceeding under this subsection based on an order issued under a law of another state that is reported to the director or a designee of the director more than one year after the date of the order on which it is based; or

       (b) Under subsection (4)(e)(i) or (ii) of this section, issue an order on the basis of an order issued under the securities act of another state unless the other order was based on conduct for which subsection (4) of this section would authorize the action had the conduct occurred in this state.

   (3) Disciplinary penalties - registrants.  If the director finds that the order is in the public interest and subsection (4)(a) through (f), (h) through (j), (l), (m), or (o) through (q) of this section authorizes the action, an order under this chapter may censure, impose a bar, or impose a civil penalty in an amount not to exceed a maximum of ten thousand dollars for each violation on a registrant and, if the registrant is a broker-dealer or investment adviser, a partner, officer, director, or person having a similar status or performing similar functions, or a person directly or indirectly in control of the broker-dealer or investment adviser.

USA with additional language to address current Washington suitability and excessive trading violations.  Consistent with current law, the fees in (c) are not capped.

(d) [Grounds for discipline.] A person may be disciplined under subsections (a) through (c) if the person:

§ 32(4).  Grounds for discipline.  A person may be disciplined under subsections (1) through (3) of this section if the person:

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(1) has filed an application for registration in this State under this [Act] or the predecessor act within the previous 10 years, which, as of the effective date of registration or as of any date after filing in the case of an order denying effectiveness, was incomplete in any material respect or contained a statement that, in light of the circumstances under which it was made, was false or misleading with respect to a material fact;

(a) Has filed an application for registration under this section which, as of its effective date, or as of any date after filing in the case of an order denying effectiveness, was incomplete in any material respect or contained any statement which was, in the light of the circumstances under which it was made, false, or misleading with respect to any material fact;

§ 32(4)(a).  Has filed an application for registration in this state under this chapter or chapter 21.20 RCW within the previous ten years, which, as of the effective date of registration or as of any date after filing in the case of an order denying effectiveness, was incomplete in any material respect or contained a statement that, in light of the circumstances under which it was made, was false or misleading with respect to a material fact;

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(2) willfully violated or willfully failed to comply with this [Act] or the predecessor act or a rule adopted or order issued under this [Act] or the predecessor act within the previous 10 years;

(b) Has willfully violated or willfully failed to comply with any provision of this chapter or a predecessor act or any rule or order under this chapter or a predecessor act, or any provision of chapter 21.30 RCW or any rule or order thereunder;

§ 32(4)(b).  Willfully violated or willfully failed to comply with this chapter or chapter 21.20 RCW or a rule adopted or order issued under this chapter or chapter 21.20 RCW within the previous ten years;

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(3) has been convicted of a felony or within the previous 10 years has been convicted of a misdemeanor involving a security, a commodity future or option contract, or an aspect of a business involving securities, commodities, investments, franchises, insurance, banking, or finance;

(c) Has been convicted, within the past ten years, of any misdemeanor involving a security, or a commodity contract or commodity option as defined in RCW 21.30.010, or any aspect of the securities, commodities, business investments, franchises, business opportunities, insurance, banking, or finance business, or any felony involving moral turpitude;

§ 32(4)(c).  Has been convicted of a felony or within the previous ten years has been convicted of a misdemeanor involving a security, a commodity future or option contract, or an aspect of a business involving securities, commodities, investments, franchises, insurance, banking, or finance;

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(4) is enjoined or restrained by a court of competent jurisdiction in an action instituted by the administrator under this [Act] or the predecessor act, a State, the Securities and Exchange Commission, or the United States from engaging in or continuing an act, practice, or course of business involving an aspect of a business involving securities, commodities, investments, franchises, insurance, banking, or finance;

(d) Is permanently or temporarily enjoined or restrained by any court of competent jurisdiction in an action brought by the director, a state, or a federal government agency from engaging in or continuing any conduct or practice involving any aspect of the securities, commodities, business investments, franchises, business opportunities, insurance, banking, or finance business;

§ 32(4)(d).  Is enjoined or restrained by a court of competent jurisdiction in an action instituted by the director under this chapter or chapter 21.20 RCW, a state, the Securities and Exchange Commission, or the United States from engaging in or continuing an act, practice, or course of business involving an aspect of a business involving securities, commodities, investments, franchises, insurance, banking, or finance;

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(5) is the subject of an order, issued after notice and opportunity for hearing by:

(A) the securities or other financial services regulator of a State or the Securities and Exchange Commission or other federal agency denying, revoking, barring, or suspending registration as a broker-dealer, agent, investment adviser, federal covered investment adviser, or investment adviser representative;

(B) the securities regulator of a State or the Securities and Exchange Commission against a broker-dealer, agent, investment adviser, investment adviser representative, or federal covered investment adviser;

(C) the Securities and Exchange Commission or a self-regulatory organization suspending or expelling the registrant from membership in the self-regulatory organization;

(D) a court adjudicating a United States Postal Service fraud order;

(E) the insurance regulator of a State denying, suspending, or revoking registration as an insurance agent; or

(F) a depository institution or financial services regulator suspending or barring the person from the depository institution or other financial services business;

(e) Is the subject of an order entered after notice and opportunity for hearing:

(i) By the securities administrator of a state or by the Securities and Exchange Commission denying, revoking, barring, or suspending registration as a broker-dealer, salesperson, investment adviser, or investment adviser representative;

(ii) By the securities administrator of a state or by the Securities and Exchange Commission against a broker-dealer, salesperson, investment adviser, or an investment adviser representative;

(iii) By the Securities and Exchange Commission or self-regulatory organization suspending or expelling the registrant from membership in a self-regulatory organization; or

(iv) By a court adjudicating a United States Postal Service fraud

The director may not commence a revocation or suspension proceeding more than one year after the date of the order relied on. The director may not enter an order on the basis of an order under another state securities act unless that order was based on facts that would constitute a ground for an order under this section

§ 32(4)(e).  Is the subject of an order, issued after notice and opportunity for hearing by:

     (i) The securities or other financial services regulator of a state or the Securities and Exchange Commission or other federal agency denying, revoking, barring, or suspending registration as a broker-dealer, sales agent, investment adviser, federal covered investment adviser, or investment adviser representative;

     (ii) The securities regulator of a state or the Securities and Exchange Commission against a broker-dealer, sales agent, investment adviser, investment adviser representative, or federal covered investment adviser;

     (iii) The Securities and Exchange Commission or a self-regulatory organization suspending or expelling the registrant from membership in the self-regulatory organization;

     (iv) A court adjudicating a United States Postal Service fraud order;

     (v) The insurance regulator of a state denying, suspending, or revoking registration as an insurance agent; or

     (vi) A depository institution or financial services regulator suspending or barring the person from the depository institution or other financial services business;

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(6) is the subject of an adjudication or determination, after notice and opportunity for hearing, by the Securities and Exchange Commission, the Commodity Futures Trading Commission; the Federal Trade Commission; a federal depository institution regulator, or a depository institution, insurance, or other financial services regulator of a State that the person willfully violated the Securities Act of 1933, the Securities Exchange Act of 1934, the Investment Advisers Act of 1940, the Investment Company Act of 1940, or the Commodity Exchange Act, the securities or commodities law of a State, or a federal or state law under which a business involving investments, franchises, insurance, banking, or finance is regulated;

(f) Is the subject of an order, adjudication, or determination, after notice and opportunity for hearing, by the Securities and Exchange Commission, the Commodities Futures Trading Commission, the Federal Trade Commission, or a securities or insurance regulator of any state that the person has violated the Securities Act of 1933, the Securities Exchange Act of 1934, the Investment Advisers Act of 1940, the Investment Company Act of 1940, the Commodities Exchange Act, the securities, insurance, or commodities law of any state, or a federal or state law under which a business involving investments, franchises, business opportunities, insurance, banking, or finance is regulated;

§ 32(4)(f).  Is the subject of an adjudication or determination, after notice and opportunity for hearing, by the Securities and Exchange Commission; the Commodity Futures Trading Commission; the Federal Trade Commission; a federal depository institution regulator; or a depository institution, insurance, or other financial services regulator of a state, that the person willfully violated the Securities Act of 1933, the Securities Exchange Act of 1934, the Investment Advisers Act of 1940, the Investment Company Act of 1940, or the Commodity Exchange Act, the securities or commodities law of a state, or a federal or state law under which a business involving investments, franchises, insurance, banking, or finance is regulated;

USA (with minor technical edits).

(7) is insolvent, either because the person’s liabilities exceed the person’s assets or because the person cannot meet the person’s obligations as they mature, but the administrator may not enter an order against an applicant or registrant under this paragraph without a finding of insolvency as to the applicant or registrant;

(h) Is insolvent, either in the sense that his or her liabilities exceed his or her assets or in the sense that he or she cannot meet his or her obligations as they mature; but the director may not enter an order against an applicant or registrant under this subsection (1)(h) without a finding of insolvency as to the applicant or registrant;

§ 32(4)(g).  Is insolvent, either because the person's liabilities exceed the person's assets or because the person cannot meet the person's obligations as they mature, but the director may not issue an order against an applicant or registrant under this subsection (4)(g) without a finding of insolvency as to the applicant or registrant;

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(8) refuses to allow or otherwise impedes the administrator from conducting an audit or inspection under Section 411(d) or refuses access to a registrant’s office to conduct an audit or inspection under Section 411(d);

(n) Refuses to allow or otherwise impedes the director from conducting an audit, examination, or inspection, or refuses access to any branch office or business location to conduct an audit, examination, or inspection.

§ 32(4)(h).  Refuses to allow or otherwise impedes the director from conducting an audit or inspection under section 31(4) of this act or refuses access to a registrant's office to conduct an audit or inspection under section 31(4) of this act;

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(9) has failed to reasonably supervise an agent, investment adviser representative, or other individual, if the agent, investment adviser representative, or other individual was subject to the person’s supervision and committed a violation of this [Act] or the predecessor act or a rule adopted or order issued under this [Act] or the predecessor act within the previous 10 years;

(j) Has failed to supervise reasonably a salesperson or an investment adviser representative, or employee, if the salesperson, investment adviser representative, or employee was subject to the person's supervision and committed a violation of this chapter or a rule adopted or order issued under this chapter. For the purposes of this subsection, no person fails to supervise reasonably another person, if:

(i) There are established procedures, and a system for applying those procedures, that would reasonably be expected to prevent and detect, insofar as practicable, any violation by another person of this chapter, or a rule or order under this chapter; and

(ii) The supervising person has reasonably discharged the duties and obligations required by these procedures and system without reasonable cause to believe that another person was violating this chapter or rules or orders under this chapter;

§ 32(4)(i).  Has failed to reasonably supervise a sales agent, investment adviser representative, or other individual, if the sales agent, investment adviser representative, or other individual was subject to the person's supervision and committed a violation of this chapter or chapter 21.20 RCW or a rule adopted or order issued under this chapter or chapter 21.20 RCW within the previous ten years;

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(10) has not paid the proper filing fee within 30 days after having been notified by the administrator of a deficiency, but the administrator shall vacate an order under this paragraph when the deficiency is corrected;

(k) Has failed to pay the proper filing fee within thirty days after being notified by the director of a deficiency, but the director shall vacate an order under this subsection (1)(k) when the deficiency is corrected;

§ 32(4)(j).  Has not paid the proper filing fee within thirty days after having been notified by the director of a deficiency, but the director shall vacate an order under this subsection (4)(j) when the deficiency is corrected;

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(11) after notice and opportunity for a hearing, has been found within the previous 10 years:

(A) by a court of competent jurisdiction to have willfully violated the laws of a foreign jurisdiction under which the business of securities, commodities, investment, franchises, insurance, banking, or finance is regulated;

(B) to have been the subject of an order of a securities regulator of a foreign jurisdiction denying, revoking, or suspending the right to engage in the business of securities as a broker-dealer, agent, investment adviser, investment adviser representative, or similar person; or

(C) to have been suspended or expelled from membership by or participation in a securities exchange or securities association operating under the securities laws of a foreign jurisdiction;

(l) Within the past ten years has been found, after notice and opportunity for a hearing to have:

(i) Violated the law of a foreign jurisdiction governing or regulating the business of securities, commodities, insurance, or banking;

(ii) Been the subject of an order of a securities regulator of a foreign jurisdiction denying, revoking, or suspending the right to engage in the business of securities as a broker-dealer, agent, investment adviser, or investment adviser representative; or

(iii) Been suspended or expelled from membership by a securities exchange or securities association operating under the authority of the securities regulator of a foreign jurisdiction;

§ 32(4)(k).  After notice and opportunity for a hearing, has been found within the previous ten years:

   (i) By a court of competent jurisdiction to have willfully violated the laws of a foreign jurisdiction under which the business of securities, commodities, investment, franchises, insurance, banking, or finance is regulated;

   (ii) To have been the subject of an order of a securities regulator of a foreign jurisdiction denying, revoking, or suspending the right to engage in the business of securities as a broker-dealer, sales agent, investment adviser, investment adviser representative, or similar person; or

    (iii) To have been suspended or expelled from membership by or participation in a securities exchange or securities association operating under the securities laws of a foreign jurisdiction;

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(12) is the subject of a cease and desist order issued by the Securities and Exchange Commission or issued under the securities, commodities, investment, franchise, banking, finance, or insurance laws of a State;

(m) Is the subject of a cease and desist order issued by the Securities and Exchange Commission or issued under the securities or commodities laws of a state; or

§ 32(4)(l).  Is the subject of a cease and desist order issued by the Securities and Exchange Commission or issued under the securities, commodities, investment, franchise, banking, finance, or insurance laws of a state;

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(13) has engaged in dishonest or unethical practices in the securities, commodities, investment, franchise, banking, finance, or insurance business within the previous 10 years; or

(g) Has engaged in dishonest or unethical practices in the securities or commodities business;

§ 32(4)(m) Has engaged in dishonest or unethical practices in the securities, commodities, investment, franchise, banking, finance, or insurance business within the previous ten years;

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(14) is not qualified on the basis of factors such as training, experience, and knowledge of the securities business.   However, in the case of an application by an agent for a broker-dealer that is a member of a self-regulatory organization or by an individual for registration as an investment adviser representative, a denial order may not be based on this paragraph if the individual has successfully completed all examinations required by subsection (e).   The administrator may require an applicant for registration under Section 402 or 404 who has not been registered in a State within the two years preceding the filing of an application in this State to successfully complete an examination.

(i) Has not complied with a condition imposed by the director under RCW 21.20.100, or is not qualified on the basis of such factors as training, experience, or knowledge of the securities business, except as otherwise provided in subsection (2) of this section;

§ 32(4)(n).  Is not qualified on the basis of factors such as training, experience, and knowledge of the securities business.  However, in the case of an application by a sales agent for a broker-dealer that is a member of a self-regulatory organization or by an individual for registration as an investment adviser representative, a denial order may not be based on this subsection (4)(n) if the individual has successfully completed all examinations required by subsection (5) of this section.  The director may require an applicant for registration under section 22 or 24 of this act who has not been registered in a state within the two years preceding the filing of an application in this state to successfully complete an examination;

USA

RCW 21.20.035  Unlawful purchases or sales for customer's account.

It is unlawful for a broker-dealer, salesperson, investment adviser, or investment adviser representative knowingly to effect or cause to be effected, with or for a customer's account, transactions of purchase or sale (1) that are excessive in size or frequency in view of the financial resources and character of the account and (2) that are effected because the broker-dealer, salesperson, investment adviser, or investment adviser representative is vested with discretionary power or is able by reason of the customer's trust and confidence to influence the volume and frequency of the trades.

§ 32(4)(o).  Knowingly effects or causes to be effected, with or for a customer's account, transactions of purchase or sale that:

    (i) Are excessive in size or frequency in view of the financial resources and character of the account; and

    (ii) Are effected because the person is vested with discretionary power or is able by reason of the customer's trust and confidence to influence the volume and frequency of the transactions;

RCW 21.20.035 approach retained as a ground for discipline.

RCW 21.20.702.  Suitability of recommendation--Reasonable grounds required.

(1) In recommending to a customer the purchase, sale, or exchange of a security, a broker-dealer, salesperson, investment adviser, or investment adviser representative must have reasonable grounds for believing that the recommendation is suitable for the customer upon the basis of the facts, if any, disclosed by the customer as to his or her other security holdings and as to his or her financial situation and needs.

 

§ 32(4)(p).  In recommending to a customer the purchase, sale, or exchange of a security, does not have reasonable grounds for believing that the recommendation is suitable for the customer upon the basis of the facts, if any, disclosed by the customer as to his or her other security holdings and as to his or her financial situation and needs; or

RCW 21.20.702(1) approach retained as a ground for discipline.

(2) Before the execution of a transaction recommended to a noninstitutional customer, other than transactions with customers where investments are limited to money market mutual funds, a broker-dealer, salesperson, investment adviser, or investment adviser representative shall make reasonable efforts to obtain information concerning:
     (a) The customer's financial status;
     (b) The customer's tax status;
     (c) The customer's investment objectives; and
     (d) Such other information used or considered to be reasonable by the broker-dealer, salesperson, investment adviser, or investment adviser representative in making recommendations to the customer.

§ 32(4)(q).  Before the execution of a transaction recommended to a noninstitutional customer, other than transactions with customers where investments are limited to money market mutual funds, does not make reasonable efforts to obtain information concerning:

    (i) The customer's financial status;

    (ii) The customer's tax status;

    (iii) The customer's investment objectives; and

    (iv) Such other information used or considered to be reasonable in making recommendations to the customer.

RCW 21.20.702(2) approach retained as a ground for discipline.

(e) [Examinations.] A rule adopted or order issued under this [Act] may require that an examination, including an examination developed or approved by an organization of securities regulators, be successfully completed by a class of individuals or all individuals. An order issued under this [Act] may waive, in whole or in part, an examination as to an individual and a rule adopted under this [Act] may waive, in whole or in part, an examination as to a class of individuals if the administrator determines that the examination is not necessary or appropriate in the public interest and for the protection of investors.

RCW 21.20.110(2). The director, by rule or order, may require that an examination, including an examination developed or approved by an organization of securities administrators, be taken by any class of or all applicants. The director, by rule or order, may waive the examination as to a person or class of persons if the administrator determines that the examination is not necessary or appropriate in the public interest or for the protection of investors.

§ 32(5).  Examinations.  A rule adopted or order issued under this chapter may require that an examination, including an examination developed or approved by an organization of securities regulators, be successfully completed by a class of individuals or all individuals.  An order issued under this chapter may waive, in whole or in part, an examination as to an individual and a rule adopted under this chapter may waive, in whole or in part, an examination as to a class of individuals if the director determines that the examination is not necessary or appropriate in the public interest and for the protection of investors.

USA

(f) [Summary process.] The administrator may suspend or deny an application summarily; restrict, condition, limit, or suspend a registration; or censure, bar, or impose a civil penalty on a registrant before final determination of an administrative proceeding.  Upon the issuance of an order, the administrator shall promptly notify each person subject to the order that the order has been issued, the reasons for the action, and that within 15 days after the receipt of a request in a record from the person the matter will be scheduled for a hearing.  If a hearing is not requested and none is ordered by the administrator within 30 days after the date of service of the order, the order becomes final by operation of law.  If a hearing is requested or ordered, the administrator, after notice of and opportunity for hearing to each person subject to the order, may modify or vacate the order or extend the order until final determination.

(3) The director may issue a summary order pending final determination of a proceeding under this section upon a finding that it is in the public interest and necessary or appropriate for the protection of investors

§ 32(6).  Summary process.  The director may suspend or deny an application summarily; restrict, condition, limit, or suspend a registration; or censure, bar, or impose a civil penalty on a registrant before final determination of an administrative proceeding.  Upon the issuance of an order under this subsection, the director shall give such notice of the order and of the opportunity for a hearing pursuant to chapter 34.05 RCW as is practicable to persons who are required to comply with the order.  If a hearing is not requested and none is ordered by the director within twenty days after the date of service of the order, the order becomes final by operation of law.  If a hearing is requested or ordered, the director, after notice of and opportunity for hearing to each person subject to the order, may modify or vacate the order or extend the order until final determination.

USA with additional language consistent with the Washington APA.

(g) [Procedural requirements.] An order issued may not be issued under this section, except under subsection (f), without:

(1) appropriate notice to the applicant or registrant;

(2) opportunity for hearing; and

(3) findings of fact and conclusions of law in a record [in accordance with the state administrative procedure act].

§ 32(7).  Procedural requirements.  An order under this section, except when issued under subsection (6) of this section, shall comply with the adjudicative proceedings provisions of chapter 34.05 RCW.

USA language amended to follow the Washington APA. 

(4) The director may not impose a fine under this section except after notice and opportunity for hearing. The fine imposed under this section may not exceed ten thousand dollars for each act or omission that constitutes the basis for issuing the order. If a petition for judicial review has not been timely filed under RCW 34.05.542(2), a certified copy of the director's order requiring payment of the fine may be filed in the office of the clerk of the superior court in any county of this state. The clerk shall treat the order of the director in the same manner as a judgment of the superior court. The director's order so filed has the same effect as a judgment of the superior court and may be recorded, enforced, or satisfied in like manner.

USA (note that RCW 21.20.110(4) is largely addressed by USA § 604(f) and § 48 of this draft bill).

(h) [Control person liability.] A person that controls, directly or indirectly, a person not in compliance with this section may be disciplined by order of the administrator under subsections (a) through (c) to the same extent as the noncomplying person, unless the controlling person did not know, and in the exercise of reasonable care could not have known, of the existence of conduct that is a ground for discipline under this section.

(6) A person who, directly or indirectly, controls a person not in compliance with any part of this section may also be sanctioned to the same extent as the noncomplying person, unless the controlling person acted in good faith and did not directly or indirectly induce the conduct constituting the violation or cause of action.

§ 32(8) Control person liability.  A person that controls, directly or indirectly, a person not in compliance with this section may be disciplined by order of the director under subsections (1) through (3) of this section to the same extent as the noncomplying person, unless the controlling person did not know, and in the exercise of reasonable care could not have known, of the existence of conduct that is a ground for discipline under this section.

USA

(i) [Limit on investigation or proceeding.] The administrator may not institute a proceeding under subsection (a), (b), or (c) based solely on material facts actually known by the administrator unless an investigation or the proceeding is instituted within one year after the administrator actually acquires knowledge of the material facts.

§ 32(9).  Limit on investigation or proceeding.  The director may not institute a proceeding under subsections (1) through (3) of this section based solely on material facts actually known by the director unless an investigation or the proceeding is instituted within one year after the director actually acquires knowledge of the material facts.

USA

(7) In any action under subsection (1) of this section, the director may charge the costs, fees, and other expenses incurred by the director in the conduct of any administrative investigation, hearing, or court proceeding against any person found to be in violation of any provision of this section or any rule or order adopted under this section.

(8) In any action under subsection (1) of this section, the director may enter an order requiring an accounting, restitution, and disgorgement, including interest at the legal rate under RCW 4.56.110(3). The director may by rule or order provide for payments to investors, rates of interest, periods of accrual, and other matters the director deems appropriate to implement this subsection.

(9) The director shall immediately suspend the license or certificate of a person who has been certified pursuant to RCW 74.20A.320 by the department of social and health services as a person who is not in compliance with a support order. If the person has continued to meet all other requirements for reinstatement during the suspension, reissuance of the license or certificate shall be automatic upon the director's receipt of a release issued by the department of social and health services stating that the licensee is in compliance with the order.

§ 32(10).  Costs, fees, and expenses.  In any action under this section, the director may charge the costs, fees, and other expenses incurred by the director in the conduct of any administrative investigation, hearing, or court proceeding against any person found to be in violation of any provision of this section or any rule or order adopted under this section.

    (11) Accounting, restitution, and disgorgement.  In any action under this section, the director may issue an order requiring an accounting, restitution, and disgorgement, including interest at the legal rate under RCW 4.56.110(4).  The director may by rule or order provide for payments to investors, rates of interest, periods of accrual, and other matters the director deems appropriate to implement this subsection.

    (12) Noncompliance with a support order.  The director shall immediately suspend the license or certificate of a person who has been certified pursuant to RCW 74.20A.320 by the department of social and health services as a person who is not in compliance with a support order.  If the person has continued to meet all other requirements for reinstatement during the suspension, reissuance of the license or certificate shall be automatic upon the director's receipt of a release issued by the department of social and health services stating that the licensee is in compliance with the order.

RCW 21.20.110(7) - (9) retained to preserve existing regulatory remedies. 

§ 33.  Sections 21 through 32 of this act are each added to chapter 21.20A RCW (created in section 115 of this act) and codified with the subchapter heading of "Broker-Dealers, Investment Advisers, Investment Adviser Representatives, and Federal Covered Investment Advisers."

Code Reviser Instructions