E-Mail


		February 10, 1997


Mr. Jonathan Katz
Secretary
US Securities and Exchange Commission
450 5th Street, N.W.
Washington, D.C. 20549

Re:	RULES IMPLEMENTING AMENDMENTS TO THE INVESTMENT 
	ADVISERS ACT OF 1940
	REL. No. IA-1601
	FILE No. S7-31-96

Dear Secretary Katz:

	Please accept this correspondence as a formal response on behalf of Secretary of State 
George H. Ryan and the Illinois Securities Department  with regard to the above referenced 
proposed rule release.  That release enunciates certain proposed rules intended to implement the 
restructuring of investment adviser regulation envisioned by Congress pursuant to the Investment 
Advisers Supervision and  Coordination Act. 

	The Illinois Securities Department recognizes the need to clarify and define with 
specificity the scope of regulation between federal and state authorities.  However, several 
proposed rules appear to either create additional confusions regarding appropriate regulatory 
authority or to improperly divest the various states of the authority to regulate.  

	Specifically, the Illinois Securities Department believes that any attempt by the 
Commission to define the term "investment adviser representative" is inappropriate.  To accept a 
Commission mandated definition is to ignore the regulatory partnership created by Congress and 
the role exclusively reserved to the various states to require registration or licensing.  The 
Commission's articulated fear that the various states will not reach a consensus as to a uniform 
definition, while legitimate, is perhaps premature.  The Illinois Securities Department and all other 
states are cognizant of the need to achieve such uniformity within the three years provided by 
Congress or face additional preemption.  




	The Illinois Securities Department is also greatly concerned with the apparent new 
limitations on state enforcement activities with regard to Commission registered investment 
advisers and certain associated persons.  The proposed Commission rule appears to limit state 
enforcement actions only to those instances where fraud has been clearly established.  Such an 
interpretation ignores the plain language of the Coordination Act which allows for state action if 
there has been a showing of fraud OR deception.   

	In the course of analyzing the proposed rules, the Illinois Securities Department has 
received and reviewed certain comments prepared by the North American Securities 
Administrators Association, Inc.  As a member of this organization, and as an independent state 
securities regulator the Illinois Securities Department believes these comments to be well 
reasoned.  The Illinois Securities Department supports the positions of the North American 
Securities Administrators Association as they relate to the issues of improperly equating the terms 
"retail" and "natural persons"; deleting the obfuscatory term "regularly" from the definition of 
investment adviser "place of business"; and  removing from comment the proposal that registered 
salespersons be formally deleted from the definition of investment advisor representatives.

	Thank you in advance for your consideration of this correspondence.  Secretary of State 
George H. Ryan and the Illinois Securities Department appreciate the opportunity to provide a 
state perspective on these issues and to work in conjunction with the Commission to efficiently 
regulate the securities industry.

		Sincerely,
 
		
		

		
		Robert H. Newtson
		Director
February 10, 1997
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