Did a federally registered investment adviser need workers’ compensation proof to renew a Connecticut notice filing?

Plain-English summary

In January 2000, Connecticut’s AG concluded that filing a notice and fee with the Banking Department did not turn a federally registered investment adviser into a state licensee. The department’s acknowledgment confirmed notice, not permission to operate based on a Connecticut competency review. Renewing that notice likewise did not renew a “license or permit to operate a business” for purposes of the workers’ compensation proof requirement.

The distinction reflected federal securities law at the time. It barred state registration of certain federally registered advisers while preserving state notice filings and fees. The AG answered the first two questions through that distinction, so he did not decide the requester’s alternative preemption and liability questions. A footnote made clear that investment advisers otherwise within Connecticut’s Workers’ Compensation Act still had to comply with it.

Federally registered advisers at the time

The notice and renewal did not trigger the particular state license-renewal proof rule. The opinion did not exempt advisers from workers’ compensation law itself.

Banking officials at the time

The AG characterized the department’s letter as acknowledgment of a notice filing, rather than a business license requiring proof of workers’ compensation coverage at renewal.

Currency note

This opinion was issued in 2000. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Common questions

Q: Was a Connecticut securities notice filing a license to operate?
A: No. The AG said notice informed the banking department of a federally registered adviser’s business; it did not grant permission based on state competency findings.

Q: Did the annual notice renewal require workers’ compensation proof under the business-license rule?
A: No. That particular proof provision applied to license or permit renewal, and the AG did not classify the notice renewal as either.

Q: Did the AG decide whether federal securities law preempted the workers’ compensation proof rule?
A: No. Once he concluded that the state rule did not apply to this notice, he said the preemption question did not need an answer.

Background and statutory framework

The banking commissioner asked four linked questions about securities notices and workers’ compensation compliance. The AG compared the legal function of a state license with a federal adviser’s state notice, then resolved the threshold classification issue without deciding the conditional questions that followed.

Citations and references

Statutes: Conn. Gen. Stat. § 31-286a; 15 U.S.C. § 80b-3a.

Source

• Landing page: https://portal.ct.gov/AG/Opinions
• Opinion page: https://portal.ct.gov/ag/opinions/2000-formal-opinions/honorable-john-p-burke--department-of-banking--2000001-formal-opinion-attorney-general-of-connecticu

Original opinion text

Honorable John P. Burke , Department of Banking , 2000-001 Formal Opinion, Attorney General of Connecticut

Attorney General's Opinion

Attorney General, Richard Blumenthal

January 21, 2000

Honorable John P. Burke

Banking Commissioner

Department of Banking

260 Constitution Plaza

Hartford, CT 06103

Dear Commissioner Burke:

You recently requested an opinion from this office regarding the following questions:

1. Is the filing of a notice and fee by a federally-registered investment adviser under Section 36b-6(d) or 36b-6(e) of the Connecticut General Statutes, for which a letter of acknowledgment is issued by the Department, considered to be a "license or permit to operate a business in this state" within the meaning of Section 31-286a(b) of the Workers' Compensation Act?

2. Is the filing of an annual notice renewal fee by such an investment adviser under Section 36b-6(e) of the Connecticut General Statutes considered the renewal of a license or permit within the meaning of Section 31-286a(b) of the Act?

3. If the response to either of the foregoing questions is yes, is Section 31-286a(b) of the Act preempted because it exceeds what is reserved to the states under Section 307(a) of NSMIA, viz., the filing by federally-registered investment advisers of any documents filed with the SEC?

4. If it is determined that Section 31-286a(b) of the Act is preempted, will the Department be liable for failure to comply with Section 31-286a(b) if it fails to obtain from federally-registered investment advisers sufficient evidence of current compliance with the workers' compensation insurance coverage requirements of Section 31-284?

As discussed below, it is our opinion that the filing of a notice and fee by a federally-registered investment adviser, under Section 36b-6(d) or 36b-6(e), for which a letter of acknowledgment is issued, does not constitute a "license or permit to operate a business in this state" within the meaning of Section 31-286a(b) of the Workers' Compensation Act.1

DISCUSSION

The Connecticut Workers' Compensation Act provides that "no state department, board or agency may renew a license or permit to operate a business in this state unless the applicant first presents sufficient evidence of current compliance with the workers' compensation requirements of Section 31-284..." Conn. Gen. Stat. § 31-286a. The Workers' Compensation Act does not define the terms "license" or "permit." "License" is defined in Section 4-166(6) of the Connecticut Administrative Procedure Act as follows:

'License' includes the whole or part of any agency permit, certificate, approval, registration, charter or similar form of permission required by law, but does not include a license required solely for revenue purposes. (emphasis added).

With regard to consumer protection, Conn. Gen. Stat. § 21a-9(2) provides the following definition:

'License' includes the whole or part of any Department of Consumer Protection permit, approval, or similar form of permission which the department issues under authority of the general statutes and which requires (A) practice of the

profession by licensed persons only, (B) demonstration ofcompetence to practice by examination or other means and meeting of certain minimum standards and (C) enforcement of standards by the department or regulatory board or commission.

These definitions indicate that a license or permit involves permission to do business based upon a determination by the agency that the applicant is competent and meets agency standards required for such a business. The notice requirement under Sections 36b-6(d) and 36b-6(e)2 is different in that it simply provides notification to the Department of Banking that an investment adviser is registered with the federal Securities Exchange Commission and is doing business in this state. The notice requirement does not involve permission to do business based on a determination of competency. Notice simply alerts the state that such business is being conducted. Notice is helpful for purposes of investigation and enforcement. The federal act reserves to the states the power to investigate and bring enforcement actions against an investment adviser with respect to fraud or deceit. 15 U.S.C. § 80b-3a.

Section 307 of the National Securities Markets Improvement Act of 1996 ("NSMIA") (Public Law 104-290) also supports the conclusion that the notice requirement is different from a license or permit. Section 203A of NSMIA preempts the states from requiring the registration of investment advisers with assets under management in excess of $25 million.3 15 U.S.C. § 80b-3a. However, Section 307 of NSMIA preserves a notice filing requirement to the states. Section 307 provides:

Nothing in this title or any amendment made by this title prohibits the securities commission... of any State from requiring the filing of any documents filed with the Commission pursuant to the securities laws solely for notice purposes, together with a consent to service of process and any required fee. (emphasis added).

The preemption of state registration under 15 U.S.C. § 80b-3a, and the "preservation of filing requirements" solely for notice purposes, supports the analysis that notice does not constitute a license or permit to operate a business, but merely provides notice to the state that a federally-registered investment adviser is doing business in the state.

Therefore, with respect to the first two questions presented, the filing of a notice and fee by a federally-registered investment adviser under Section 36b-6(d) or 36b-6(e) of the Connecticut General Statutes, for which a letter of acknowledgment is issued by the Department, should not be considered to be a "license or permit to operate a business in this state" within the meaning of Section 31-286a(b) of the Workers' Compensation Act. Thus, Section 31-286a(b) of the Workers' Compensation Act does not apply. Based upon the answer to questions one and two, a response is not necessary for questions three and four.

Very truly yours,

RICHARD BLUMENTHAL

ATTORNEY GENERAL

Joan C.G. Grear

Assistant Attorney General

RB:JCG:jg

1 The requirements of the Connecticut Workers' Compensation Act continue to apply to all investment advisers who fall within the scope of the Act.

2 Section 36b-6(d) provides in relevant part:

An investment adviser that is registered with the Securities and Exchange Commission may, in lieu of filing an application for branch office registration, file a notice with the commissioner for each branch office of the adviser located within this state together with a nonrefundable notice fee of one hundred dollars per branch office....

Section 36b-6(e) provides in relevant part:

The following investment advisers are exempted from the registration requirements under subsection (c) of this section: Any investment adviser that (1) is registered or required to be registered under Section 203 of the

Investment Advisers Act of 1940[.] ... Any investment adviser claiming an exemption pursuant to subdivision (1) or (2) of this subsection that is not otherwise excluded under subsection (1) of section 36b-3, shall first file with

the commissioner a notice of exemption together with a consent to service of process as required by subsection (g) of section 36b-33. The notice of exemption shall contain such information as the commissioner may require and shall be accompanied by a nonrefundable fee of two hundred fifty dollars. Such notice of exemption shall be valid until December thirty-first of the calendar year in which it was first filed and may be renewed annually thereafter upon submission of such information as the commissioner may require together with a nonrefundable fee of

one hundred fifty dollars....

3It should also be noted that the Connecticut statutes continue to require the registration of certain investment adviser agents. Although the federal act preempts the State from requiring the registration of an investment adviser that is registered under section 15 U.S.C. § 80b3, the act provides that "a State may license, register, or otherwise qualify any investment adviser representative who has a place of business located within that State." 15 U.S.C. § 80b-3a(b). The State of Connecticut continues to require the registration of investment adviser agents pursuant to Sections 36b-3 and 36b-6 of the Connecticut General Statutes.