Chapter 551

551.401(2)(cm) (cm) Accredited investors as defined in Rule 501 (a) (1), (2), (3), (7) or (8) adopted under the Securities Act of 1933.

551.401(2)(d) (d) A nonaffiliated federal covered investment adviser with investments under management in excess of $100,000,000 acting for the account of others pursuant to discretionary authority in a signed record.

551.401(2)(e) (e) A bona fide preexisting customer whose principal place of residence is not in this state and the person is registered as a broker-dealer under the Securities Exchange Act of 1934 or not required to be registered under the Securities Exchange Act of 1934 and is registered under the securities act of the state in which the customer maintains a principal place of residence.

551.401(2)(f) (f) A bona fide preexisting customer whose principal place of residence is in this state but was not present in this state when the customer relationship was established, if all of the following apply:

551.401(2)(f)1. 1. The broker-dealer is registered under the Securities Exchange Act of 1934 or not required to be registered under the Securities Exchange Act of 1934 and is registered under the securities laws of the state in which the customer relationship was established and where the customer had maintained a principal place of residence.

551.401(2)(f)2. 2. Within 45 days after the customer’s first transaction in this state, the person files an application for registration as a broker-dealer in this state and a further transaction is not effected more than 75 days after the date on which the application is filed, or, if earlier, the date on which the administrator notifies the person that the administrator has granted registration or denied the application for registration or has stayed the pendency of the application for good cause; provided the person may effect unsolicited orders to liquidate open positions in existing customer accounts if no commission or other remuneration is paid or given directly or indirectly for effecting such transactions.

551.401(2)(h) (h) Any other person exempted by rule adopted or order issued under this chapter.

551.401(3) (3) Limits on employment or association. It is unlawful for a broker-dealer, or for an issuer engaged in offering, offering to purchase, purchasing, or selling securities in this state, directly or indirectly, to employ or associate with an individual to engage in an activity related to securities transactions in this state if the registration of the individual is denied or suspended or revoked or the individual is barred from employment or association with a broker-dealer, an issuer, an investment adviser, or a federal covered investment adviser by an order of the administrator under this chapter, the Securities and Exchange Commission, or a self-regulatory organization. A broker-dealer or issuer does not violate this subsection if the broker-dealer or issuer did not know, and in the exercise of reasonable care could not have known, of the denial, suspension, revocation, or bar. Upon request from a broker-dealer or issuer and for good cause, an order under this chapter may modify or waive, in whole or in part, the application of the prohibitions of this subsection to the broker-dealer.

551.401(4) (4) Foreign transactions. A rule adopted or order issued under this chapter may permit any of the following:

551.401(4)(a) (a) A broker-dealer that is registered in Canada or other foreign jurisdiction and that does not have a place of business in this state to effect transactions in securities with or for, or attempt to effect the purchase or sale of any securities by, any of the following:

551.401(4)(a)1. 1. An individual from Canada or other foreign jurisdiction who is temporarily present in this state and with whom the broker-dealer had a bona fide customer relationship before the individual entered the United States.

551.401(4)(a)2. 2. An individual from Canada or other foreign jurisdiction who is present in this state and whose transactions are in a self-directed tax advantaged retirement plan of which the individual is the holder or contributor in that foreign jurisdiction.

551.401(4)(a)3. 3. An individual who is present in this state, with whom the broker-dealer customer relationship arose while the individual was temporarily or permanently resident in Canada or the other foreign jurisdiction.

551.401(4)(b) (b) An agent who represents a broker-dealer that is exempt under this subsection to effect transactions in securities or attempt to effect the purchase or sale of securities in this state as permitted for a broker-dealer described in par. (a).

551.401 History History: 2007 a. 196; 2013 a. 52.

551.401 Annotation Violators of s. 551.31 (1) and (3) are subject to strict liability. What constitutes transacting business as an investment advisor in violation of s. 551.31 (3) is discussed. Garretto v. Elite Advisory Services, Inc., 793 F. Supp. 796 (1992).

551.401 Note NOTE: The above annotation refers to ch. 551 as it existed prior to its repeal and recreation by 2007 Wis. Act 196.

551.402 551.402 Agent registration requirement and exemptions.

551.402(1) (1) Registration requirement. It is unlawful for an individual to transact business in this state as an agent unless the individual is registered under this chapter as an agent or is exempt from registration as an agent under sub. (2).

551.402(2) (2) Exemptions from registration. The following individuals are exempt from the registration requirement of sub. (1):

551.402(2)(a) (a) An individual who represents a broker-dealer in effecting transactions in this state limited to those described in section 15 (h) (2) of the Securities Exchange Act of 1934 (15 USC 78o (h) (2)).

551.402(2)(b) (b) An individual who represents a broker-dealer that is exempt under s. 551.205 (1) (b) 2. or 551.401 (2) or (4).

551.402(2)(c) (c) An individual who represents an issuer with respect to an offer or sale of the issuer’s own securities or those of the issuer’s parent or any of the issuer’s subsidiaries, and who is not compensated in connection with the individual’s participation by the payment of commissions or other remuneration based, directly or indirectly, on transactions in those securities.

551.402(2)(d) (d) An individual who represents an issuer and who effects transactions in the issuer’s securities exempted by s. 551.202, other than s. 551.202 (11), (14) or (24).

551.402(2)(e) (e) An individual who represents an issuer that effects transactions solely in federal covered securities of the issuer, but an individual who effects transactions in a federal covered security under section 18 (b) (3) or 18 (b) (4) (D) of the Securities Act of 1933 (15 USC 77r (b) (3) or 77r (b) (4) (D)) is not exempt if the individual is compensated in connection with the agent’s participation by the payment of commissions or other remuneration based, directly or indirectly, on transactions in those securities.

551.402(2)(f) (f) An individual who represents a broker-dealer registered in this state under s. 551.401 (1) or exempt from registration under s. 551.205 (1) (b) 2. or 551.401 (2) in the offer and sale of securities for an account of a nonaffiliated federal covered investment adviser with investments under management in excess of $100,000,000 acting for the account of others pursuant to discretionary authority in a signed record.

551.402(2)(g) (g) An individual who represents an issuer in connection with the purchase of the issuer’s own securities.

551.402(2)(h) (h) An individual who represents an issuer or broker-dealer and who restricts participation to performing clerical or ministerial acts.

551.402(2)(hm) (hm) An individual who represents a broker-dealer and effects transactions in this state exclusively with customers listed under s. 551.401 (2) (a) to (d) and (h).

551.402(2)(i) (i) Any other individual exempted by rule adopted or order issued under this chapter.

551.402(3) (3) Registration effective only while employed or associated. The registration of an agent is effective only while the agent is employed by or associated with a broker-dealer registered under this chapter or an issuer that is offering, selling, or purchasing its securities in this state.

551.402(4) (4) Limit on employment or association. It is unlawful for a broker-dealer, or an issuer engaged in offering, selling, or purchasing securities in this state, to employ or associate with an agent who transacts business in this state on behalf of broker-dealers or issuers unless the agent is registered under sub. (1) for the broker-dealer or issuer or exempt from registration under sub. (2).

551.402(5) (5) Limit on affiliations. Except as permitted under sub. (6), an individual may not act as an agent for more than one broker-dealer or one issuer at a time, unless the broker-dealers or the issuers for which the agent acts are affiliated by direct or indirect common control or are authorized by rule or order under this chapter.

551.402(6) (6) Dual representation. An agent may make offers and sales of securities for more than one issuer that is a limited partnership or for more than one issuer that is an investment company without obtaining a separate registration for each limited partnership or investment company represented by the agent if all of the following conditions are satisfied:

551.402(6)(a) (a) The limited partnerships have the same general partner or the investment companies have the same investment adviser.

551.402(6)(b) (b) An application to amend the agent’s registration to name each limited partnership or investment company as the agent’s employer is filed with and approved by the administrator before the agent makes any offer or sale in the state on behalf of the additional limited partnership or investment company.

551.402 History History: 2007 a. 196; 2013 a. 52.

551.403 551.403 Investment adviser registration requirement and exemptions.

551.403(1) (1) Registration requirement. It is unlawful for a person to transact business in this state as an investment adviser unless the person is registered under this chapter as an investment adviser or is exempt from registration as an investment adviser under sub. (2).

551.403(2) (2) Exemptions from registration. The following persons are exempt from the registration requirement of sub. (1):

551.403(2)(a) (a) A person whose only clients in this state are:

551.403(2)(a)1. 1. Federal covered investment advisers, investment advisers registered under this chapter, or broker-dealers registered under this chapter.

551.403(2)(a)2. 2. Institutional investors, except any institutional investor described in s. 551.102 (11) (k), (m), or (o).

551.403(2)(a)2m. 2m. Accredited investors as defined in Rule 501 (a) (1) or (3) adopted under the Securities Act of 1933.

551.403(2)(a)3. 3. Bona fide preexisting clients whose principal places of residence are not in this state if the investment adviser is registered or exempt from registration under the securities act of the state in which the clients maintain principal places of residence.

551.403(2)(a)4. 4. Any other client exempted by rule adopted or order issued under this chapter.

551.403(2)(b) (b) A person without a place of business in this state if the person has had, during the preceding 12 months, not more than 5 clients that are resident in this state in addition to those specified under par. (a).

551.403(2)(c) (c) Any other person exempted by rule adopted or order issued under this chapter.

551.403(3) (3) Limits on employment or association. It is unlawful for an investment adviser, directly or indirectly, to employ or associate with an individual to engage in an activity related to investment advice in this state if the registration of the individual is denied or suspended or revoked or the individual is barred from employment or association with an investment adviser, federal covered investment adviser, or broker-dealer by an order under this chapter, the Securities and Exchange Commission, or a self-regulatory organization, unless the investment adviser did not know, and in the exercise of reasonable care could not have known, of the denial, suspension, revocation, or bar. Upon request from the investment adviser and for good cause, the administrator, by order, may waive, in whole or in part, the application of the prohibitions of this subsection to the investment adviser.

551.403(4) (4) Investment adviser representative registration required. It is unlawful for an investment adviser to employ or associate with an individual required to be registered under this chapter as an investment adviser representative who transacts business in this state on behalf of the investment adviser unless the individual is registered under s. 551.404 (1) or is exempt from registration under s. 551.404 (2).

551.403 History History: 2007 a. 196; 2011 a. 32.

551.403 Annotation Violators of s. 551.31 (1) and (3) are subject to strict liability. What constitutes transacting business as an investment advisor in violation of s. 551.31 (3) is discussed. Garretto v. Elite Advisory Services, Inc., 793 F. Supp. 796 (1992).

551.403 Note NOTE: The above annotation refers to ch. 551 as it existed prior to its repeal and recreation by 2007 Wis. Act 196.

551.404 551.404 Investment adviser representative registration requirement and exemptions.

551.404(1) (1) Registration requirement. It is unlawful for an individual to transact business in this state as an investment adviser representative unless the individual is registered under this chapter as an investment adviser representative or is exempt from registration as an investment adviser representative under sub. (2).

551.404(2) (2) Exemptions from registration. The following individuals are exempt from the registration requirement of sub. (1):

551.404(2)(a) (a) An individual who is employed by or associated with an investment adviser that is exempt from registration under s. 551.403 (2) or a federal covered investment adviser that is excluded from the notice filing requirements of s. 551.405.

551.404(2)(am) (am) An individual who is employed by or associated with an investment adviser or a federal covered investment adviser and whose clients in the state are exclusively those clients listed in s. 551.403 (2) (a) 1. to 2m. and 4.

551.404(2)(b) (b) Any other individual exempted by rule adopted or order issued under this chapter.

551.404(3) (3) Registration effective only while employed or associated. The registration of an investment adviser representative is effective only while the investment adviser representative is employed by or associated with an investment adviser registered under this chapter or a federal covered investment adviser that has made or is required to make a notice filing under s. 551.405.

551.404(4) (4) Limit on affiliations. An individual may transact business as an investment adviser representative for more than one investment adviser or federal covered investment adviser unless a rule adopted or order issued under this chapter prohibits or limits an individual from acting as an investment adviser representative for more than one investment adviser or federal covered investment adviser.

551.404(5) (5) Limits on employment or association. It is unlawful for an individual acting as an investment adviser representative, directly or indirectly, to conduct business in this state on behalf of an investment adviser or a federal covered investment adviser if the registration of the individual as an investment adviser representative is suspended or revoked or the individual is barred from employment or association with an investment adviser or a federal covered investment adviser by an order under this chapter, the Securities and Exchange Commission, or a self-regulatory organization. Upon request and for good cause, the administrator, by order issued, may waive, in whole or in part, the application of the requirements of this subsection.

551.404(6) (6) Referral fees. An investment adviser registered or exempt from registration under this chapter, a federal covered investment adviser that has filed a notice under s. 551.405 or is exempt from such notice filing requirement, or a broker-dealer registered or exempt from registration under this chapter is not required to employ or associate with an individual as an investment adviser representative if the only compensation paid to the individual for a referral of investment advisory clients is paid to an investment adviser registered or exempt from registration under this chapter, a federal covered investment adviser that has filed a notice or is exempt from filing a notice under s. 551.405, or a broker-dealer registered or exempt from registration under this chapter with which the individual is employed or associated as an investment adviser representative.

551.404 History History: 2007 a. 196.

551.405 551.405 Federal covered investment adviser notice filing requirement.

551.405(1) (1) Notice filing requirement. Except with respect to a federal covered investment adviser described in sub. (2), it is unlawful for a federal covered investment adviser to transact business in this state as a federal covered investment adviser unless the federal covered investment adviser complies with sub. (3).

551.405(2) (2) Notice filing requirement not required. The following federal covered investment advisers are not required to comply with sub. (3):

551.405(2)(a) (a) A federal covered investment adviser without a place of business in this state if its only clients in this state are:

551.405(2)(a)1. 1. Federal covered investment advisers, investment advisers registered under this chapter, and broker-dealers registered under this chapter.

551.405(2)(a)2. 2. Institutional investors.

551.405(2)(a)2m. 2m. Accredited investors as defined and listed in 17 CFR 230.501 (a) (1), (2), (3), (7), or (8) under Regulation D under the Securities Act of 1933.

551.405(2)(a)3. 3. Bona fide preexisting clients whose principal places of residence are not in this state.

551.405(2)(a)4. 4. Other clients specified by rule adopted or order issued under this chapter.

551.405(2)(b) (b) A federal covered investment adviser without a place of business in this state if the person has had, during the preceding 12 months, not more than 5 clients that are resident in this state in addition to those specified under par. (a).

551.405(2)(c) (c) Any other person excluded by rule adopted or order issued under this chapter.

551.405(3) (3) Notice filing procedure. A person acting as a federal covered investment adviser, not excluded under sub. (2), shall file a notice, a consent to service of process complying with s. 551.611, and such records as have been filed with the Securities and Exchange Commission under the Investment Advisers Act of 1940 required by rule adopted or order issued under this chapter and pay the fees specified in s. 551.614 (2).

551.405(4) (4) Effectiveness of filing. The notice under sub. (3) becomes effective upon its filing and expires on December 31 unless any of the following occurs:

551.405(4)(a) (a) The notice filing is renewed.

551.405(4)(b) (b) The notice filing is limited or extended for not more than 6 months and the notice filer pays a fee, adjusted proportionately by the administrator by rule or order.

551.405(4)(c) (c) The administrator specifies a different expiration date by rule or order.

551.405 History History: 2007 a. 196.

551.406 551.406 Registration by broker-dealer, agent, investment adviser, and investment adviser representative.

551.406(1) (1) Application for initial registration. A person shall register as a broker-dealer, agent, investment adviser, or investment adviser representative by filing with the administrator, or an organization which the administrator by rule designates, an application and a consent to service of process complying with s. 551.611, and paying the fee specified in s. 551.614 and any reasonable fees charged by the designee of the administrator for processing the filing. The application must contain all of the following:

551.406(1)(a) (a) The information or record required for the filing of a uniform application.

551.406(1)(b) (b) Upon request by the administrator, any other financial or other information or record that the administrator determines is appropriate.

551.406(2) (2) Amendment. If the information or record contained in an application filed under sub. (1) is or becomes inaccurate or incomplete in a material respect, the registrant shall promptly file a correcting amendment.

551.406(3) (3) Effectiveness of registration.

551.406(3)(a) (a) If an order is not in effect and a proceeding is not pending under s. 551.412, registration is effective 30 days from the filing of the application or at the earliest of the following times prior to the expiration of 30 days from the filing of the application, whichever is earlier, unless the registration is denied:

551.406(3)(a)1. 1. The date that the administrator issues registration to the applicant.