On July 27, 1995, Patricia Staggs, Assistant General Counsel and Chief, Compliance Bureau of the Legal Division, Compliance Bureau of the California Department of Insurance, wrote regarding Investment Advisers:

"That exemption appears at Insurance Code Section 1831(e) and provides an exemption to the chapter regarding life and disability analysts for "an investment adviser as defined in section 25009 of the Corporations Code, when acting in that capacity." Section 25009 of the Corporations Code provides as follows:

"Investment adviser means any person who, for compensation, engages in the business of advising others, either directly or through publications or writings, as to the value of securities or as to the advisability of investing in, purchasing or selling securities, or who, for compensation and as part of regular business, publishes analyzes or reports concerning securities. "Investment Adviser" does not include (a) a bank, trust company or savings and loan association; (b) an attorney law, accountant, engineer or teacher whose performance of these services is solely incidental to the practice of his profession; (c) a broker-dealer whose performance of the services is solely incidental to the conduct of his business as a broker-dealer and who receives no special compensation for them; or (d) a publisher of any bona fide newspaper, news magazine or business or financial publication of general, regular and paid circulation and the agents and servants thereof, but this clause (d) does not exclude any person who engages in any other activity which would constitute him as an investment adviser within meaning of this section.

A life and disability insurance analyst is defined in insurance code 32.5 as follows:

"Life and disability insurance analyst" means a person who, for a fee or compensation, paid by or derived from any person or source other than an insurer, advises, purports to advise, or offers to advise any person insured under, named as a beneficiary of, or having any interest in, a life or disability insurance contract, in any manner concerning that contract or his or her rights in respect thereto."

The Department's view to that exemption set forth in insurance code 1831(e) is that an investment adviser need not submit to regulation by the Department of Insurance so long as the activities engaged in by the investment adviser fall within the defined activities of an investment advisor as set forth in Corporations Code section 25009. It is noteworthy that the definition of an investment adviser contains no reference to insurance related activities (emphasis mine). Therefore, any activities included within the definition of life and disability analyst, such as advising as the life insurance products, are clearly outside the "capacity" of an investment adviser, and would subject the person to the provisions of law relating to life and disability insurance analysts.

Very Truly Yours,

Patricia Staggs