CONTENTS
Introduction = xxxi
Summary = 1
A. Regulatory Systems = 1
1. Overview = 1
2. Who is Regulated? = 2
3. The Jurisdictionat Trigger = 3
4. Relationships with Affiliates = 4
B. The Registration Process = 5
1. Application Form = 5
2. Fees = 6
3. How Long Does the Registration Process Take? = 6
4. Reciprocity = 7
5. Information Required／Substantive Qualification = 7
6. Financial Requirements = 8
7. Jurisdiction of Organization = 10
8. Number of Residents Serving as Officers, Directors or Employees = 11
C. Substantive Regulation = 11
1. Antifraud Provisions = 11
2. Insider Trading = 12
3. Client Disclosure = 13
4. Performance-Based Fees = 15
5. Advertising = 15
6. Book and Records = 17
7. Principal and Agency Transactions = 17
8. Soft Dollars = 17
9. Pooled Funds = 18
D. Enforcement and Inspections = 19
E. Extraterritorial Application = 19
Argentina / Patricia L$$\acute o$$pez Aufranc = 23
A. Overview of the Regulatory Structure = 23
1. Introduction = 23
2. Role of the BCRA, the CNV and the MVBA = 23
B. The Registration Process = 24
1. Banks = 24
2. Brokers and Brokerage Firms = 25
3. Over-the-Counter Brokers = 25
4. Companies Acting as Managers of Investment Funds = 26
C. Overview of Substantive Requirements = 27
1. Banks = 27
2. Brokers and Brokerage Firms = 27
3.OTC Brokers = 28
4. Companies Acting as Managers of Investment Funds = 28
D. Advisory Activities = 28
E. General Regulatory Scheme = 28
1. Insider Trading = 28
2. Antifraud Provisions = 29
3. Client Disclosure Requirements = 29
4. Bank Secrecy = 29
F. Enforcement = 30
G. Advisers of Pooled Funds = 30
H. Taxation = 31
I. Soft Dollar Arrangements = 31
J. Extraterritorial Application of Regulatory System = 31
Australia / John O'Sullivan = 33
A. Overview of the Regulatory Structure = 33
1. The Corporations Law = 33
1.1. State Legislation but Uniform Nationally = 33
1.2. Role of Australian Securities Commission = 34
1.3. Previous Legislation and Regulator = 34
2. Sources of Other Applicable Regulations = 34
3. Registration Requirements = 35
3.1. Definition of Dealer = 35
3.2. Definition of Securities = 35
3.3. Definition of Dealing = 36
3.4. Definition of Investment Adviser = 36
3.5. Exclusions from Definition of Investment Adviser = 36
3.6. Registration of Dealers and Investment Advisers Required = 37
3.7. Distinction between "Dealer" and "Investment Adviser" = 37
3.8. Meaning of Carrying on a Business = 38
3.9. Definition of Securities Not Confined to Australian Securities = 39
3.10. Representatives No Longer Required to be Licensed = 39
3.11. Review of Activities of Affiliates = 40
3.12. Exemptions from Registration = 41
B. The Registration Process = 42
1. How to Register with the ASC = 42
1.1. Application Form = 42
1.2. Registration Fee = 43
1.3. Timing of the Registration Process: Streamlining Applications = 43
1.4. Registration as a Foreign Company = 44
2. Information Required = 44
2.1. Form 701 = 44
3. Substantive Requirements = 45
3.1. Qualification Requirements = 45
3.2. Net Worth or Other Financial Requirements = 46
3.3. Jurisdiction, of Organization = 47
3.4. Number of Nationals Serving as Officers, Directors or: Employees = 47
3.5. Financial Statements = 47
3.6. Refusal of Licence = 47
C. Overview of Substantive Regulation = 48
1. Permissible Activities = 48
1.1. Registered Advisers = 48
1.2. Unregistered Advisers = 48
1.3. Differences Between Activities Performed by Australian and Non-Australian Advisers = 48
2. General Categories or Substantive Regulation = 49
2.1. General = 49
2.2. Client Disclosure Requirements = 50
2.3. Perfonnancft'Based Fees = 50
2.4. "Know Your Client snd Product Rule" = 50
2.5. Principal and／or Agency Tiansactiona with Clients = 51
2.6. Antifraud Provisions = 51
2.7. Insider Trading = 52
2.7.1. General Provision = 52
2.7.2. Specific Insider Trading Provisions = 52
2.7.3. Insiders to Whom the Prohibitions Apply = 52
2.7.4. Restrictions on Insider Trading = 52
2.7.5. Exemptions to Prohibition on Insider Trading = 53
2.8. Advertising Restrictions = 54
2.9. Custody Regulations = 55
2.9.1 Custody of Client Funds = 55
2.9.2. Custody of Client Securities = 56
2.10. Client Disclosure = 56
2.11. Record-Keeping Requirements = 57
D. Enforcement = 58
1. General = 58
1.1. General Penal Provisions = 58
1.2. Revocation or Suspension of Licences = 58
1.3. Banning Orders = 59
1.4. Penalty Notice System = 59
1.5. Prosecutions = 60
1.6. The Court's Powers = 60
1.7. Statutory Right of Appeal = 61
1.8. Inspections = 61
1.9. Production of Books and Records = 62
E. Extraterritorial Application = 62
Brazil / Joaquim Sim$$\tilde o$$es Barbosa = 65
A. Overview or the Regulatory Structure = 65
1. Law No. 6.385 of December 7, 1976 = 65
1.1. Role of the CVM = 65
1.2. CVM Regulations = 65
2. Definition of Analyst = 66
3. Definition of Investment Adviser = 66
4. Definition of Investment Manager = 66
5. Registration Requirements = 66
5.1. Investment Managers = 66
5.2. Investment Advisers = 66
5.3. Investment Analysts = 67
6. registration Not Required = 67
7. Application or Registration Requirements to Non-Brazilians = 67
B. The Registration Process = 67
1. How to Register with the CVM = 67
1.1. Application Form = 67
1.2. Registration Fee = 68
1.3. How Long Does the Registration Process Take? = 68
1.4. Reciprocity = 68
1.5. Are There Different Registration Provisions for Brazilian and non-Brazilian Applicants? = 68
C. Substantive Review of Applicants = 68
1. Investment Managers = 68
1.1. Individuals = 68
1.2. Corporations = 69
2. Investment Advisers = 69
2.1. Individuals = 69
2.2. Corporations = 70
3. Investment Analysts = 70
3.1. General = 70
3.2. Professional Organization = 70
4. Substantive Review of Applicants = 70
D. Overview of Substantive Regulation = 70
1. Introduction = 70
2. General Categories = 71
2.1. Antifraud Provisions = 71
2.2 Insider Trading = 71
2.3. Contracts = 71
2.4. Record-keeping = 71
2.5. Cusiudy = 71
2.6. Reports to Clients = 72
2.7. Principal Transactions with Clients = 72
2.8. Advertising Restrictions = 72
2.9. Loans = 72
2.10. Soil Dollar Arrangements = 72
E. Enforcement = 72
1. Role of the CVM = 72
1.1. Inspections = 72
1.2. Administrative Proceedings = 73
1.3. Civil Penalties = 73
1.4. Criminal Referral = 73
F. Extraterritorial Application = 73
1. General = 73
Canada / Dwudd K. Charter ; Tina M. Woodside = 75
A. Introduction = 75
1. Securities regulation in Canada = 75
2. Securities Regulation In Ontario = 75
2.1. Self-Regulatory Organization = 76
3. Resident vs. Non-Resident Advisers = 76
B. Registration of Non-Resident Advisers = 76
1. Definition of Non-Resident Adviser = 76
2. Exemptions from Registration = 76
2.1. De Minimis = 77
2.2. Commodity Pools = 77
2.3. Sub-Adviser to Registered Adviser = 77
2.4. Affiliated Pension Funds = 77
2.5. Distributions to Existing Holders = 78
2.6. Existing Privately Placed Funds = 78
2.7. Funds Under Prior Registration = 78
3. Permitted Clients of an International Adviser = 78
C. Registration of Resident Advisers = 79
1. Registration Requirement = 79
2. Categories of Registration = 79
3. Definition of Security = 80
4. Persons Exempted from Registration = 80
5. Registration of Partners and Officers of Registered Advisers = 80
6. How io Register with the OSC = 80
6.1. Application Form = 80
6.2. Registration Fee = 80
6.3. How Long Does the Registration Process Take? = 81
6.4. No Reciprocity = 81
7. Information Required = 81
7.1. Form 3 = 81
7.2. Form 4 = 81
7.3. Review of Information = 81
7.4. Financial Statements = 81
7.5. Other Documentation = 82
7.5.1. Shareholders' List = 82
7.5.2. Directors and Officers List = 82
7.5.3. Freedom of Information Consent Form = 82
7.5.4. Form 4s = 82
7.5.5. Conscflting Documents = 82
7.5.6. Fiscal Year-End = 82
7.5.7. Direction to Auditors = 82
7.5.8. Discretionary Authority = 82
7.5.9. Prepaid Fees Trust Account = 83
7.5.10. Insurance = 83
7.5.11. Compliance Officer = 83
7.5.12. Fairness Policy = 83
7.5.13. Sources of Capital = 83
7.5.14. Interrelationships with other Registrants = 83
7.5.15. Conflicts of Interest Policy = 83
8. Renewal of Registration = 83
8.1. Documents to be Filed = 83
8.2. Fee = 83
9. Amendments to Registration = 83
9.1. Form = 84
10. Financial Statements = 84
11. Refusal to Register = 84
12. Suspension of Registration = 84
13. Surrender of Registration = 84
D. Overview of Substantive Requirements = 85
1. Address of Service = 85
2. Acquisition of Securities of Another Registrant = 85
3. Terms and Conditions of Registration = 85
4. Minimum Working Capital = 85
5. Insurance = 86
6. Record-keeping = 86
6.1. Method of Maintaining Records = 86
6.2. Length of Time = 86
6.3. Types of Books and Records = 86
7. Proficiency Requirements = 87
7.1. Securities Adviser = 87
7.2. Investment Counsel = 87
7.3. Where the Applicant is Not an Individual = 87
7.4. Discretion of the Director = 87
8. New Accounts and Supervision = 88
8.1. Supervision of Accounts = 88
8.2. Know Your Client = 88
8.3. Fairness in Allocating investment Opportunities = 88
8.4. Fees to be Charged = 88
8.5. Pooling of Accounts = 88
8.6. Material Changes = 88
8.7. Conflicts of Interest = 89
9. Prohibition Against Trading with Inside Knowledge = 89
10. Soft Dollars = 89
10.1. General = 89
10.2. Limitations on Soft Dollar Deals = 89
10.3. Disclosure of Soft Dollar Deals = 89
11. Segregation of Funds and Securities = 90
12. Ducy to Deal Fairly = 90
13. Disclosure of Financial Interest of Advisers = 90
14. Advertising = 90
15. Self-Dealing = 91
15.1. Definition, of Responsible Person = 91
15.2. Prohibition Against Self-Dealing = 91
16. Conflicts of Interest = 91
16.1. Statement of Policies = 91
16.2. Delivety to Clients = 92
16.3. Duty to Amend Statement of Policies = 92
17. Advice Regarding Related Issuers = 92
17.1. Limitations on Advising = 92
17.2. Limitations on Recommendations = 92
17.3. Limitations on Advertising = 93
18. Exemption from Substantive Requirements = 93
E. Enforcement = 93
1. Enforcement Branch = 93
2. Sources. of Information = 93
3. Investigations = 94
3.1. Scope of Investigation = 94
3.2. Powers to Summon Witnesses and Require Production = 94
3.3. Counsel = 94
3.4. Seizure of Property = 94
3.5. Inspection of Seized Documents = 94
3.6. Accountants and Experts = 95
3.7. Report of Investigation = 95
3.8. Evidence Not to be Disclosed = 95
3.9. Report ro Minister = 95
4. Audits by the OSC = 95
4.1. Access to Records = 95
4.2. Fees = 95
5. Offences = 95
5.1. General = 95
5.2. Defence = 96
5.3. Directors and Officers = 96
5.4. Limitation Period = 96
6. Remedies = 96
6.1. Suspension of Registration = 96
6.2. Order for Compliance = 96
6.3. Older to Freeze Property = 97
6.4. Appointment of Receiver = 97
7. Extraprovincial Application = 97
Chile / Christi$$\acute a$$n ; Jos$$\acute e$$ Maria Eyzaguirre Jr. ; M. de Los Angeles Per$$\acute e$$z = 99
A. Overview of the Regulatory Structure = 99
1. Introduction = 99
1.1. Freedom to Contract = 99
1.2. Investment Advisory Agreements = 99
2. Investment Advisory Activities Carried Out by Intermediaries of Securities Entities and Other Specially Regulated Entities = 100
2.1. The SVS = 101
2.2. Broker-Dealers and Stockbrokers = 101
B. Overview of Permissible Advisory Activities of Stockbrokers and Broker-Dealers = 101
1. Management of Securities Portfolios = 101
1.1. PortfoUo Management Agreement = 101
1.2. Safekeeping Requirement = 102
1.3. Client Registry = 102
2. Investment Advisory Services = 102
3. Advice with Respect to Foreign Securities = 103
3.1. Mandate Agreement = 103
3.2. Form Requirement = 103
4. Substantive Regulation = 104
4.1. Insider Trading = 104
C. Extraterritorial Application = 104
Republic of China / Paul S.P. Hsu ; Alex Jui-Lin Liu = 105
A. Overview of Regulatory Structure = 105
1. Securities and Exchange Law = 105
1.1. Introduction = 105
1.2. Rote of Securities and Exchange Commission = 105
1.3. Definition of Securities = 105
2. Rules Governing Administration of Securities Investment Consulting Enterprises = 106
2.1. Introduction = 106
2.2. Definition of Securities Investment Consulting Enterprises = 106
2.2.1. Definition of Securities Investment Consulting Services = 106
2.2.2. Definition of Compensation = 106
3. Registration Requirements = 106
3.1. SEC Approval = 106
3.2. Corporate Form and Paid-in Capital Requirement = 107
B. Registration Process = 107
1. Application Form = 107
2. Registration Fees = 107
3. Time Required for Registration = 107
4. Reciprocity = 108
5. Different Registration Provisions for ROC and Non-ROC Applicants = 108
6. Local Enterprise = 108
6.1. Special Permit = 108
6.2. Certificate of Incorporation = 109
6.3. Operation Licence = 109
6.4. Business Licence = 110
7. Enterprise with Foreign Shareholding = 110
7.1. Special Permit = 110
7.2. Foreign Investment Approval = 110
7.3. Certificate of Incorporation = 111
7.4. Operation Licence = 111
7.5. Business Licence = 111
C. Overview of Substantive Regulation = 111
1. Permissible Activities = 111
2. Prohibited Activities = 113
3. Staff Requirement and Ineligibility = 113
3.1. Investment Analyst = 113
3.2. Directors = 114
3.3. Ineligibility = 114
4. Retainer Agreement = 115
5. Public Announcement Requirement = 115
6. Reporting Requirement = 115
7. Record-Keeping Requirement = 116
D. Enforcement = 116
1. Inspection Power = 116
2. Correction Powers = 116
3. General Penal Provisions = 116
3.1. Failure co Register = 117
3.2. Obstruction of SEC's Inspection = 117
3.3. Failure to Keep Records = 117
E. Extraterritorial Application = 117
The European Economic Community and European Economic Area / Debevoise ; PIimpton, London = 119
A The EEC, EEA and Harmonization of Financial Services Laws = 119
1. Introduction = 119
2. The Role of Directives = 119
3. Directives Relevant to Investment Adviser Activities = 120
4. The EEA = 120
B. The Investment Services Directive = 121
1. General = 121
1.1. Covered Entities = 121
1.2. Limited Application or Exclusion of Entities = 121
1.3. Instruments Services Covered = 123
1.4. Investment Services Covered = 123
1.5. Ancillary "Non-Core" Services Covered = 123
2. Home Country Requirements for and Conditions of Authorization = 124
2.1. Home Country = 124
2.2. Conditions of Authorization = 124
2.3. Other Requirements = 125
2.4. Authorization Procedure = 125
2.5. Grounds for Withdrawal of Authorization = 125
2.6. Foreign Branches = 126
2.7. Prior Consultation = 126
2.8. Grandfather Provisions = 126
3. Reciprocity = 126
3.1. Notification Procedures = 127
3.2. Equivalent Treatment = 127
3.3. National Treatment = 127
3.4. Additional Notification Requirements = 128
3.5. International Obligations = 128
4. Continuing Home Country Regulation = 128
4.1. Financial Resources = 128
4.2. Compliance with Conditions of Authorization = 128
4.3. Qualifying Holdings = 128
4.3.1. Prior Notice = 128
4.3.2. Review of Management Qualifications = 129
4.3.3. Prior Consultation About Cross-Border Acquisitions = 129
4.3.4. Other Notices Required = 129
4.3.5. Prejudicial Influence = 129
4.4. Prudential Rules = 129
4.5. Rules of Conduct = 130
4.6. Transaction Reporting Requirements = 130
4.7. Transparency = 131
5. Doing Business in Host Countries = 131
5.1. Establishment of a Branch = 132
5.2. Procedure = 132
6. Provision of Services = 132
7. Permissible Regulation by Host Countries = 133
7.1. Compliance = 133
7.2. Enforcement = 133
7.3. Advertising = 134
8. Optional Confinement of Certain Services to Regulated Markets◆UFFFD◆ Guaranteed Access to Markets = 134
9. Cooperation Among Member States = 134
C. The Capital Adeouacv Directive = 135
1. General = 135
1.1. Scope = 135
1.2. Initial Capital Requirements = 135
1.3. Grandfather Provisions = 136
2. Provision Against Market Risk = 136
3. Reporting Requirements = 137
D. The Insider Trading Directive = 137
E. The UCITS Directive = 137
F. The Pension Fund Duective = 138
France / Sylvie Deparis-Maze = 139
A. Overview of the Regulatory Structure = 139
1. Introduction = 139
2. The August 2 Law = 140
2.1. Persons Required to Register = 140
2.2. Persons Not Required to Register = 140
2.3. Application of Registration Requirements to Affiliates = 140
B. The Registration Process = 140
1. How to Register = 140
1.1. Application Form = 140
1.2. Registration Fee = 141
1.3. How Long Does the Registration Process Take? = 141
1.4. Reciprocity = 141
1.5. Are There Different Registration Provisions for French and Non-French Applicants? = 141
1.6. Relationships of Applicant with Affiliates = 141
2. Information Required = 141
2.1. Registered Capital: Shareholders and Directors = 141
2.2. Proposed Activities = 142
2.3. Staff and Equipment = 142
2.4. Piacing of Orders and Filing = 142
2.5. Statutory Auditors = 143
2.6. Intermediaries Responsible for the Execution of Orders = 143
2.7. Projected Financials = 143
2.8. Power = 143
3. Substantive Review of Applicants = 143
4. Substantive Requirements = 143
4.1. Qualifications of Directors = 143
4.2. Minimum Capital (COB Reguiation 89-04, Article 3) = 144
4.3. Jurisdiction of Organization = 144
4.4. Number of Narionals Serving as Directors, Officers or Empioyees = 144
C. Overview of Substantive Regulation = 144
1. General Activities = 144
2. General Categories of Regulatory System = 144
2.1. Client Disclosure Requirements = 144
2.2. Fees = 145
2.3. Principal／Agency Transactions with Clients = 145
2.4. Insider Trading = 145
2.5. Advertising Restrictions = 145
2.6. Custody Regulation = 145
2.7. Ethical Rules = 146
2.8. Disclosure Document = 146
D. Enforcement = 146
1. COB Administration = 146
2. Criminal Sanctions = 146
3. COB Injunctive Relief = 146
4. Revocation of Registration = 147
5. Administrative Fines = 147
6. Publication = 147
E. Extraterritorial Application = 147
Germany / Dr. Heinz-Joachim Freund = 149
A. Overview of the Regulatory Structure = 149
1. The German Regulatory System = 149
1.1 The Federal System = 149
1.2. Concurrent Jurisdiction = 149
1.3. Responsibility of State Governments = 150
2. Registration Requirements = 150
2.1. Resident Capital Investment Companies = 150
2.2. Non-Resident Capital Investment Companies = 151
2.3. European Community Funds = 151
2.4. Brokers = 151
2.5. Investment Advisory Activities Distinguished from Brokerage = 152
2.6. Investment Advisory Activities of Banks = 152
2.7. Domestic Investment Firms = 152
3. Persons Not Required to Register = 153
4. Application of Registration Requirement to Non-German Applicants = 153
5. Independence of Subsidiaries from Their Parent Companies = 153
5.1. Substantive Requirements = 153
5.2. Independenre of Applicant = 154
5.3. Piercing the Corporate Veil = 154
5.4. Indicia of Independence Taken into Account = 154
B. The Registration Process = 154
1. How to Register = 154
1.1. Application Form = 154
1.2. Registration Fee = 155
1.3. How Long Does the Registration Process Take? = 155
1.4. Reciprocity = 155
1.5. Are There Different Registration Provisions for German and Non-German Applicants? = 156
2. Information Required = 156
3. Substantive Review of Applicants = 157
3.1. Specific Grounds for Denial = 157
3.2. Other Possible Grounds for Denial = 157
3.3. Appeal of Denial of Registration = 158
4. Net Worth or Other Financial Requirements = 158
C. Overview of Substantive Regulation = 158
1. Antifraud Provisions = 159
2. Insider Trading = 159
3. Client Disclosure Requrtenients = 159
4. General Relationship with Clients = 160
5. Performance-Based Fees = 160
6. Principal and／or Agency Transactions with Clients = 161
6.1. Civil Code = 161
6.2. Guidelines = 161
6.3. Proposed Securities Exchange Act = 162
7. Advertising Restrictions = 162
8. Custody Regulations = 163
8.1. Section 2 = 163
8.2. Section 6 = 163
8.3. Section 8 = 164
9. Books and Records = 164
9.1. Section 10 = 164
9.2. Section 25 = 164
9.3. Subsection 2 = 165
10. Soft Dollar Arrangements = 165
11. Pooled Funds = 165
D. Enforcement = 165
1. Third-Party Remedies = 165
2. Penalties = 166
3. Audit and Inspection = 166
E. Extraterritorial Application = 167
1. Registration, of Non-German Brokers = 167
2. Regulation of Activities Outside Germany = 167
Hong Kong / Eric Kong = 169
A. Overview of Regulatory Structure = 169
1. The Securities Ordinance = 169
1.1 Role of Securities and Futures Commission = 169
2. Registration Requirements = 170
2.1. Definition of Securities = 170
2.2. Definition of Dealer = 171
2.3. Definition of Dealing in Securiries = 171
2.4. Definition of Investment Adviser = 172
2.5. Registration of Dealers and Investment Advisers = 173
2.6. Registration of Representatives = 173
2.7. Exemptions from Registration = 173
B. The Registration Process = 174
1. How to Register with the SFC = 174
1.1. Application Form = 174
1.2. Registration Fee and Deposit = 174
1.3. How Long Does The Registration Process Take? = 175
2. Register of Dealers, Investment Advisers, etc. = 175
3. Substantive Requirements = 175
3.1. Fit and Proper Criteria = 175
3.2. Special Provisions Relating to Dealers = 176
3.3. Financial Statements = 178
3.4. Number of NationaIs = 178
4. Refusal and Revocation of Licence = 178
4.1. Grounds for Refusal = 178
4.2. Grounds for Revocation or Suspension = 178
4.3. Appeals = 179
5. Ongoing Obligations = 180
C. Overview of Substantive Regulation = 180
1. Conduct of Business = 180
1.1. Offers by Dealers = 180
1.2. Calls by Dealers = 181
1.3. Hawking of Securities = 181
1.4. Issue of Contract Notes = 181
1.5. Disclosure of Interests = 181
2. Investment Advisory Contracts = 181
3. Soft Dollar Arrangements = 182
4. Antifraud Provisions = 182
5. Insider Dealing = 182
5.1. What Constitutes Insider Dealing = 183
5.2. The Meaning of "Connected" = 183
6. Advertising Restrictions = 184
7. Disclosure of Interests = 184
8. Custody of Securities and Clients' Funds = 185
8.1. Securities = 185
8.2. Clients' Funds = 185
9. Disclosure of Clients = 185
10. Record-Keeping Requirements = 185
11. Compensation Fund = 186
D. Enforcement = 186
1. Offences = 186
2. Powers of Intervention = 186
3. Remedies in Tort = 187
E. Extraterritorial Application = 187
Italy / Claudio Visco = 189
A. Overview of the Regulatory Structure = 189
1. The Italian Regulatory System = 189
1.1. Investment Advisory Services = 190
1.2. Authorized Persons = 190
1.3. Role of CONSOB and of the Bank of Italy = 190
2. Registration Requirements = 190
2.1. Professional Nature of the Activity = 191
2.2. Definition of Security = 191
2.3. Persons Exempted from Registration = 191
2.3.1. Intragroup Services = 192
2.3.2. Qualified Persons = 192
2.3.3. Statistics and Studies = 192
2.3.4. Financial Statements and Reports = 193
B. The Registration Process = 193
1. Registration of a SIM or a Fiduciary Company with CONSOB = 193
1.1. Application Form = 193
1.2. Registration Fee = 194
1.3. Timing = 194
1.4. Information, required = 194
1.4.1. Corporate Documents of the Applicant = 194
1.4.2. Documents Concerning each of me Directors, General Managers and Executives of the Applicant = 195
1.4.3. Documents Relating to ihe Members of the Board of Statutory Auditors = 195
1.4.4. Documents Concerning die Persons or Entities that Directly or Indirectly Control the Applicant = 195
1.4.5. Informative Memorandum = 196
2. Registration of Banks as Investment Advisers = 197
2.1. Application Form = 197
2.2. Registration Fee = 197
2.3. Timing = 197
2.4. Information Required = 197
3. Substantive Requirements = 198
3.1. Corporate Form = 198
3.2. Directors, General Managers, Managing Partners and Other Executives = 198
3.3. Board of Statutory Auditors = 198
3.4. Parent Companies = 199
3.5. Net Worth and Other Financial Requirements = 199
3.6. Number of Nationals = 199
3.7. Separate Organization and Accounting = 199
3.8. Participation in the Capital of a SIM = 199
3.9. Protocols = 199
4. Advisory Activities = 200
4.1. Door to Door = 200
4.2. Unregistered Advisers = 200
4.3. Foreign Advisers = 200
C. Overview of Substantive Regulation = 200
1. General Principles Applicable to Investment Services = 200
2. Specific Rules for Portfolio Management Services = 201
3. Specific Rules for Investment Advisory Services = 203
3.1. Information to the Client = 203
3.2. Persons Authorized to Deal with Clients = 203
3.3. Telephone Calls and Mailing = 203
3.4. Books and Records = 204
4. Advertising Restrictions = 204
5. Compensation = 204
5.1. Criteria = 204
5.2. Performance-Based Fees and Soft Dollars = 205
D. Enforcement = 205
1. Inspections by CONSOB and by the Bank of Italy = 205
2. Filing of Corporate Documents and Remarks and Observations of the Board of Statutory Auditors = 205
3. Certification of the Balance Sheet = 205
E. Extraterritorial Application = 206
F. Tax Provisions = 207
Japan / Takashi Yoneda ; Munefuni Sonoda ; Frederick W. Guinee = 209
A. Overview of the Regulatory Structure = 209
1. Law Concerning the Regulation of Investment Advisory Business Relating to Securities = 209
1.1. Sources of Law = 209
1.2. Role of the Ministry of Finance = 209
1.3. Industry Association = 210
2. Application of the Regulatory System = 210
2.1. Investmenc Advisory Business = 210
2.2. Discretionary Investment Management = 211
2.3. Securities, etc. Covered = 211
2.4. Affiliate Separateness Requirements―Non-Discrecionary Investment Advisers = 212
2.5. Affiliate Separateness Requirements and Limitations on Doing Other Business―Advisers Authorized to Do Business Under Discretionary Investment Contracts = 213
2.5.1. Rules Governing Affiliate Separateness = 213
2.5.2. Limitations on Other Business Relationships = 213
2.5.3. Securities Business and Related Business = 214
2.6. Persons Exempted from Registration = 214
2.6.1. General = 214
2.6.2. Trust Banks = 214
2.6.3. Securities Investment Trust. Management Companies = 215
B. The Registration Process = 215
1. How to Register with the MOF = 215
1.1. Application Form = 215
1.2. Registration Fee = 215
1.3. How Long Does the Registration Process Take? = 216
1.4. Reciprocity = 216
1.5. Are There Different Registration Provisions for Japanese and Non-Japanese Applicants = 216
2. Information Required = 216
2.1. Identifying Information = 216
2.2. Attachments = 217
3. Substantive Review of Applicants = 217
3.1. Grounds for Denial = 217
3.2. Cabinet Order = 218
3.3. Formal Substantive Review of Applicants = 218
4. Substantive Requirements = 218
4.1. Financial Statements = 218
4.2. Qualification Requirements for Individuals = 219
4.3. Net Worth or Other Financial Requirements = 219
4.4. Jurisdiction of Organization = 219
4.5. Number of Nationals Serving as Officers, Directors or Employees = 219
4.6. Are There Different Substantive Requirements for Japanese and Non-Japanese Advisers? = 219
C. The Authorization Process for Discretionary Investment Advisers = 219
1. How to Be Authorized by the MOF = 219
1.1. Application = 219
1.2. Authorization Fee = 220
1.3. How Long Does the Authorization Process Take? = 220
1.4. Reciprocity = 220
1.5. Are There Different Authorization Provisions for Japanese and Non-Japanese Applicants? = 220
2. Information Required = 220
2.1. Identifying Information = 220
2.2. Attachments = 221
3. Substantive Review of Applicants = 222
3.1. Formal Substantive Review of Applications = 222
3.2. Ministry Guideline = 222
3.2.1. Financial Basis = 222
3.2.2. Revenue-Expense Budget = 222
3.2.3. Composition of Staff = 223
4. Substantive Requirements = 223
4.1. Financial Statements = 223
4.2. Qualification Requirements = 223
4.3. Net Worth or Other Financial Requirements for Authorization to do Business under Discretionary Contracts = 224
4.4. Jurisdiction of Organization = 224
4.5. Number of Nationals Serving as Officeis, Directors or Employees = 224
4.6. Are There Different Substantive Requirements for Japanese and Non-Japanese Advisers? = 224
D. Overview of Substantive Regulation = 224
1. Antifraud Provisions = 224
2. Insider Trading Regulations = 226
3. Client Disclosure Requirements = 226
3.1. Initial Client Disclosure Requirements = 226
3.2. Ongoing Client Disclosure Requirements = 227
3.3. Disclosure Regarding Transactions = 228
3.4. Reports for Clients = 228
4. Performance-Based Fees = 228
5. Pooled Funds Restriction = 228
6. Principal and／or Agency Transacdons with. Clients = 229
7. Advertising Restrictions = 229
8. Custody Regulations = 229
9. Fiduciary Standards = 230
10. Termination of Contract = 230
11. Books and Records = 230
12. Annual Report to the MOF = 230
E. Enforcement = 230
1. Types of Remedies = 230
1.1 Administrative Sanctions = 231
1.2. Criminal Penalties = 231
1.3. Civil Remedies = 232
2. Administration of the Enforcement Programme: Relationship Between the MOF and Public Prosecutors = 232
3. Periodic Inspections of Registered Advisers = 232
4. Mandatory Deposit System = 232
F. Extmemtorial Application = 233
1. Territorial Approach = 233
1.1. General = 233
1.2. Resident Advisers = 234
1.3. Non-Resident Advisers = 234
1.4. Transactions with Affiliates Abroad = 234
1.5. Do the Substantive Regulations Differ if the Registrant is Non-Japanese? = 235
1.6. Safe Harbours = 235
Korea / In Suk Shim ; Helen Pak = 237
A. Overview of the Regulatory Structure = 237
1. Law Concerning Regulation of Investment Advisory Business, Relating to Securities = 237
1.1. Sources of Law = 237
1.2. The Scope of the Regulatory Authority of the MOF and the KSEC = 238
1.2.1. MOF = 238
1.2.2. KSEC = 238
1.3. Industry Association = 238
2. Application of the Re gulatory System = 238
2.1. Investment Advisory Business = 238
2.2. Qualified Persons = 239
2.3. Securities Covered = 239
2.4. Discretionary Investment Management = 240
2.4.1. Investment Advisory Companies = 240
2.4.2. Securities Companies = 240
2.4.3. Securities Investment Trust Companies = 241
2.5. Persons Exempted from Registration = 241
2.6. Registration of Foreign Investment Adviser = 241
2.7. Affiliate Separateness Requirements = 243
B. The Registration Process = 244
1. How to Register with the MOP = 244
1.1. Application Form = 244
1.2. Registration Fee = 244
1.3. How Long Does the Registration Process Take? = 244
1.4. Mutuality = 245
1.5. Regulations That Distinguish Between a Domestic Company and Foreign Investment Advisers = 245
2. Information Required = 245
2.1. Application Form = 245
2.2. Specific Information Required = 245
3. Conditions to Registration = 246
3.1. Jurisdiction of Incorporation of the Applicant = 246
3.2. Requirements Concerning Capital = 246
3.3. Requirements Concerning the Nationality of the Officers and Employees = 246
3.4. Requirements Concerning Retainment of Specialists = 246
3.5. Requirements for Officers = 247
3.6. Qualifications of the Employees = 248
3.7. Business Plan = 248
4. Denial of Registration = 248
5. Disclosure of Registration = 249
C. Overview of Substantive Regulation = 249
1. Antifraud Provisions = 249
2. Insider Trading = 249
3. Investment Advisory Contract = 251
4. Delivery of Certain. Written, Information Prior to Entering into a Contract = 252
5. Reporting Regarding Transactions with Clients = 252
6. Reports to the KSEC and the SSB = 252
6.1. Periodic Reporting Requirements = 252
6.2. Other Reporting Requirements = 253
7. Fees = 253
8. Dealings with Clients = 254
9. Limitations on Advertisements = 254
10. Limitations on Custody = 255
11. Fiduciary Obligation = 255
12. Terminaticn of an Investment Advisory Contract = 253
13. Books and Records = 255
13.1. Records Concerning the Finances of an Investment Advisory Company = 255
13.2. Records Concerning Clients = 256
14. Inspection = 256
15. Management of Assets = 256
16. Mandatory Deposit Payment System = 257
D. Enforcement = 257
1. Methods = 257
1.1. Civil Law Enforcement = 257
1.1.1. Revocation of Registration = 257
1.1.2. Suspension of Operations = 258
1.1.3. Ordering of Termination of Officers = 258
1.1.4. Power to Issue Other Administrative Orders = 259
1.1.5. Joint Liabilities of Officers = 259
1.2. Criminal Law Enforcement = 259
1.2.1. Types of Criminal Sanctions = 259
1.2.2. Crittiinal Sanctions = 260
1.3. Administifltivs Sanctions = 261
2. Enforcement institutions = 261
3. Investigations by the SSB = 261
E. Extraterritorial Application = 262
1. Principle of Territoriality = 262
2. Investment Adviser Located in Korea = 262
3. Non-Resident Investment Advisers = 262
Spain / Daniel Garc$$\acute i$$a-Pita ; Gonzalo Fern$$\acute a$$ndez Atela = 263
A. Overview of the Regulatory Structure = 263
1. Statutory Scheme = 263
1.1. Overview = 263
1.1.1. Non-discretionary advisers = 263
1.1.2. Discretionary advisers = 263
1.2. Regulatory Structure = 265
2. Registration. Requirements = 265
2.1. Persons Required to Register = 265
2.2. Exemptions from Registration = 265
3. The Registration Process = 266
3.1. Application Form = 266
3.2. Administration of Registration = 266
3.3. Registration Fees and Taxes = 266
3.4. How Long Does the Process Take? = 266
3.5. Reciprocity = 266
3.6. Are There Different Registration Provisions for Domestic and Foreign Applicants = 266
3.7. Information Required = 266
3.8. Financial Statements = 267
3.9. Substantive Review of Applicants and Registration = 267
4. Substantive Requirements = 267
4.1. Qualification of Directors = 267
4.2. Incompatibilities of Directors = 268
4.3. Net Worth Requirements = 268
4.4. Jurisdiction of Organization = 268
4.5. Standard Agreements = 269
4.6. Ownership = 269
B. Advisory Activities = 269
1. General Activities = 269
2. Operative Limitations = 269
C. Overview of Substantive Regulation = 270
1. Antifraud Provisions = 270
1.1. Impartiality and Good Faith = 270
1.2. Conflict of Interests = 270
1.3. Professional Secrecy = 270
1.4. Privileged Information = 270
1.5. Chinese Walls = 270
1.6. Other Prohibited Conduct = 270
1.7. Internal Regulations = 271
1.8. Register of Transactions and Orders = 271
2. Client Disclosure Requirements = 271
3. Fees = 271
4. Principal and Agency Transactions = 272
5. Advertising Restrictions = 272
6. Custody Regulation = 272
7. Taxation = 272
D. Inspection and Enforcement = 272
1. Inspection = 272
2. Enforcement = 273
2.1. Administrative Penalties = 273
2.2. Criminal Penalties = 274
E. Extra territorial Application = 274
Switzerland / Dr. Christine Beusch-Liggenstorrfer ; Christian Girod = 275
A. Overview of the Regulatory Structure = 275
1. Introduction = 275
2. No Special Federal Legislation or Regulations Applicable to Investment Advisers = 275
3. The Banking Law = 276
3.1. Federal Banking Commission Ruling = 277
3.2. Rules Applicable to Enticies Subject to Swiss Banking Law = 277
4. The Law on Mutual Funds = 278
B. Overview of Substantive Regulation = 279
1. General Activities = 279
2. General Categories of Regulatory System = 279
2.1. Code of Ethics = 279
2.2. Contractual Relationship = 279
2.2.1. General = 279
2.2.2. Relationship with Client = 280
2.2.3. Standard of Care = 280
2.2.4. Obligation of Confidentiality = 280
2.2.4.1. Swiss Internal Law = 281
2.2.4.2. International Obligations = 281
2.2.5. Fees = 281
2.2.6. Limitations on Principal and／or Agency Transactions = 281
2.2.7. Limitations on the Entering into Soft Dollar Arrangements = 282
2.2.8. Exercising of Membership Rights in General Meetings of Shareholders = 282
2.3. Antifraud Provisions = 282
2.4. Insider Trading = 282
2.5. Advertising Restrictions = 283
2.6. Custody Regulations = 283
2.7. Client Disclosure = 283
C. Taxation = 283
D. Enforcement = 285
1. No Special Laws = 285
2. Inspections = 285
3. Claims = 285
E. Extraterritorial Application = 285
United Kingdom / Charles Abrams = 287
A. Overview of the Regulatory System = 287
1. The Financial Service Act of 1986 = 287
1.1. Scope of Regulation = 287
1.2. Client Solicitation = 288
1.2.1. Solicitation Restrictions = 288
1.2.2. The Two Main Classes of Customers = 289
1.3. Role of the Securities and Investments Board = 289
1.3.1. Rule-Making Powers = 289
1.3.2. Authorization Powers = 290
1.4. Self-Regulatory System = 290
1.4.1. The SIB as Supervisory Authority = 290
1.4.2. Remedies = 291
1.4.3. Statutory Regulation = 291
1.5. Other Routes to Registration = 291
1.6. The SROs = 292
1.6.1. IMRO = 292
1.6.2. Securities and Futures Authority = 292
1.6.3. LAUTRO = 292
1.6.4. FIMBRA = 292
1.6.5. Choice of SRO = 292
2. Investment Business Requiring Registration = 293
2.1. Regulated Investment Activities = 293
2.2. Regulated Investments = 293
2.3. Exemptions = 294
3. Definition of Investment Adviser and Application to Non-UK Firms = 294
3.1. Investment Management = 295
3.2. Investment Advice = 295
3.3. Persons Excluded from the Definition = 295
3.4. Examples of Advisers Not Excluded from Registration Requirements (Who Accordingly May Need to be Registered) = 297
3.5. Application to Group Companies = 298
3.6. Non-UK Firms: Registration = 299
3.6.1. General Principles = 299
3.6.2. Registration Process = 299
3.6.3. EEA Firms = 300
3.7. Non-UK Firms; Regulation = 300
3.8. Foreign Finns: Reciprocity = 301
B. The Registration Process = 301
1. How to Register widi an SRO (or the SIB) = 301
1.1. Application Form = 301
1.2. Registration Fee = 302
1.3. How Long Does the Registration Process Take? = 302
1.4. Reciprocity = 302
1.5. Are There Different Registration Provisions for UK and Non-UK Applicants? = 303
2. Information Required = 303
2.1. SROs Have Similar Requirements = 303
2.2. Financial Statements = 303
3. Substantive Review of Applicants = 304
3.1. Fit and Proper Standard = 304
3.2. Compliance Review = 304
3.3. Employee Approval = 304
3.4. Restrictions on Activities = 305
4. Substantive Requirements for Registered Investment Advisers = 305
4.1. Qualification Requirements = 305
4.2. Net Worth or Other Financial Requirements = 305
4.3. Jurisdiction of Organization = 306
4.4. Number of UK Nationals Serving as Directors, Officers or Employees = 306
C. Overview of Permissible Advisory Activities = 306
1. UK Regulatory Approach = 306
1.1. Types ot Permissible Activities = 306
1.1.1. Limits on Activities of Registered Advisers = 307
1.1.2. Advisory Business in the UK = 307
1.1.3. Limits on Activities of foreign Advisers with No UK Place of Business = 307
1.2. Differences in Permissible Activities for UK and Non-UK Investment Advisers = 307
D. Overview of Substantive Regulation = 308
1. Antifraud Provisions = 308
2. Insider Trading = 308
2.1. Prohibition Against Insider Trading = 308
2.2. Scope of Prohibition = 308
2.3. Defences = 309
2.4. SRO Rules = 309
3. Extraterritorial Effect of These Offences = 310
4. Initial Client Disclosure Requirements = 310
5. Ongoing Client Disclosure Requirements = 311
6. Disclosure Regarding Financial Condition = 311
7. Limitations on Fees and Soft Commission Arrangements = 311
8. General Conduct of Business Rules = 311
8.1. SIB Principles = 311
8.2. SRO Rules = 312
8.3. Managers of Funds and Corporate Finance = 313
9. Principal and／or Agency Transactions with Clients = 313
10. Advertising Restrictions = 313
11. Custody Regulations = 314
12. Cold Calling = 314
13. Unregulated Collective Investment Schemes = 315
13.1. Prohibition Against General Marketing = 315
13.2. Exemptions = 315
14. UCITS and Other Non-UK Schemes: Compliance with the Marketing Restrictions = 316
E. Enforcement = 316
1. Criminal Offences = 316
F. Extraterritorial Application = 317
1. Business in the UK = 317
1.1. Overseas Person Exemption = 317
1.2. Business From the UK = 318
1.3. Criminal Offences = 318
USA / Marcia L. MacHarg ; Roberta R.W. Kameda = 319
A. Overview of the Regulatory Structure = 319
1. The Investment Advisers Act of 1940 (The Advisers Act) = 319
1.1. Role of the Securities and Exchange Commission = 319
1.2. No Self-Regulatory Organization = 320
2. Registration Requirements = 320
2.1. The Engaged in Business Standard = 320
2.2. Meaning of Compensation = 321
2.3. Definition of Security = 321
2.4. Persons Excluded from Definition of Investment Adviser = 321
2.5. Governmental Entities Excluded = 322
2.6. Persons Exempted from Registration = 322
2.7. Application of Advisers Act to Financial Planners = 322
2.8. Registration of Associated Persons Not Required = 323
2.9. Application of Registration Requirements to Non-US Advisers = 323
2.10. Registration of Affiliates = 323
2.10.1. Richard Ellis Letter = 323
2.10.2. Unibanco Letter = 324
2.10.3. Affiliates Other than Parent Companies = 324
3. State Blue Sky Regulation = 325
3.1. Registration = 325
3.2 Persons Exempt from Registration = 325
B. The Registration Process = 325
1. How to Register with the SEC = 325
1.1. Application Form = 325
1.2. Registration Fee = 326
1.3. How Long Does the Registration Process Take? = 326
1.4. Reciprocity = 326
1.5. Are There Different Registration Provisions for US and Non-US Applicants? = 327
2. Information Required = 327
2.1. Form ADV = 327
2.2. Disciplinary History = 327
2.3. ADV Part II = 327
2.4. Information About Associated Persons = 328
2.5. Financial Statements = 328
3. Substantive Requirements = 328
3.1. Net Worth or Other Financial Requirements = 328
3.2. Jurisdiction of Organization = 328
3.3. Number of Nationals Serving as Directors, Officers or Employees = 328
4. Withdrawal from Registration = 329
5. Grounds for Denial of Registration = 329
C. Overview of Substantive Regulation = 330
1. Antifcaud Provisions = 330
2. Insider Trading = 331
3. Contracts = 331
4. The Brochure Rule = 332
5. Ongoing Client Disclosure Requirements = 332
6. Disclosure to Clients of Financial and Disciplinary Information = 332
7. Annual Report to SEC = 332
8. Performance-Based Fees = 333
8.1. Exception for Fees Based on Assets under Management = 333
8.2. Exception for Fulcrum Fees = 333
8.3. Exception for Sophisticated Clients = 333
8.4. Exception for Non-US Resident Clients = 334
9. Advertising Restrictions = 334
9.1. General = 334
9.2. Specific Recommendations = 334
9.3. Antifraud Prohibition = 335
9.4. Staff Positions = 335
9.4.1. Anametrics Investment Management (publicly available May 5, 1977) = 335
9.4.2. Clover Capital Management, Inc. (publicly available October 28, 1986) = 335
10. Books and Records = 336
10.1. General = 336
10.2. Clienc Records = 336
10.3. Personal Securities Trading = 337
11. Custody Regulations = 337
11.1. Separate Bank Accounts = 337
11.2. Client Statements = 337
11.3. Annual Audit = 338
12. Soft Dollars = 338
12.1. General = 338
12.2. Safe Harbour Rule = 338
12.2.1. Brokerage and Research Services = 339
12.2.2. Only Commissions Covered = 339
12.2.3. Mixed Use Products = 339
12.2.4. Disclosure = 339
13. Inspections = 339
13.1. General = 339
13.2. Process = 340
D. Enforcement = 340
1. Division of Enforcement = 340
1.1. Sources of Information = 340
1.2. Types of SEC Investigation = 341
1.2.1. Informal Investigations = 341
1.2.2. Formal Investigations = 341
1.2.2.1. Formal Order of Investigation = 341
1.2.2.2. Subpoena Power = 341
1.2.3. Document Production and Witness Testimony = 341
2. Enforcement Proceedings = 342
2.1. Authority = 342
2.2. SFC Review = 342
3. Types of Remedies = 342
3.1. Civil Actions = 342
3.2. Equitable Remedies = 343
3.3. Administrative Proceedings = 343
3.3.1. Permanent Cease and Desist Order Proceedings = 344
3.3.2. Temporary Cease and Desist Order Proceedings = 344
3.3.3. Money Penalties = 344
3.4. Contempt Actions = 345
3.5. Alternatives to Enforcement Actions = 345
3.6. Contracts Void = 345
3.7. Private Rights of Action = 345
3.8. Controlling Person Liability = 345
4. Legislative Developments = 345
4.1. Investment Adviser Regulatory Enhancement and Disclosure Act of 1993 = 345
E. Extraterritorial Application = 346
1. The SEC's Views = 346
1.1. General = 346
1.2. The Unibanco Letter = 346
2. Other Staff Positions = 348
2.1. Client Counting = 348
2.1.1. US Resident Advisers = 348
2.1.2. Non-Resident Advisers = 348
2.2. Use of US jurisdictional Means = 349
2.2.1. US Resident Advisers = 349
2.2.2. Non-R&sident Advisers = 349
2.2.3. Reasons for Distinctions = 349
Venezuela / Gustavo A. Garc$$\acute i$$a E. = 351
A. Overview of the Regulatory Scheme = 351
1. Venezuelan Capital Market Law = 351
2. Specific Regulations Concerning Investment Advisers = 352
3. Advisory Services = 352
B. Authorization and Registration Process = 352
1. Authorisation and Registration Fee = 352
2. Application = 353
2.1. General Requirements (Article 6 RARIA) = 353
2.2. Specific Requirements for Individuals (Article 7 RARIA) = 353
2.3. Specific Requirements for Corporations (Article 9 RARIA) = 353
2.4. Minimum Capital = 354
3. Tesc for Applicants (Article 9 PAR1A) = 354
4. Granting of the Authorization, and Registration (Article 12 RARIA) = 355
4.1. Authorization = 355
4.2. Obligation of the CNV to Decide = 355
4.3. Reciprocity = 355
4.4. Advertising Restrictions = 355
4.5. Antifraud and Insider Trading = 356
4.6. Obligation to Keep Records (Articles 16, 17 and 18 RARIA) = 356
4.7. Disclosures (Article 19 RARIA) = 356
4.8. Performance-Based Fees = 357
5. Enforcement = 357
5.1. Inspections = 357
5.2. Sanctions (Article 22 RARIA) = 357
6. Extraterritorial Application = 357
