It is enacted by the General Assembly as follows:

SECTION 1. Section 7-11-204 of the General Laws in Chapter 7-11 entitled "Rhode Island Uniform Securities Act" is hereby amended to read as follows:

7-11-204. Exempt investment adviser and investment adviser representatives -- The following investment advisers and investment adviser representatives are exempt from the licensing requirements of section 7-11-203:

(1) An investment adviser who is not required to be registered as an investment adviser under the Investment Advisers Act of 1940, 15 U.S.C. section 80b-1 et seq., if:

(i) Its only clients in this state are other investment advisers, federal covered advisers, broker dealers, financial or institutional investors; and the

(ii) The investment adviser has no place of business in this state and the investment adviser directs business communications in this state to a person who is an existing client of the investment adviser and whose principal place of residence is not in this state; or

(iii) (ii) The investment adviser has no place of business in this state and the investment adviser, during the preceding twelve (12) month period, has had not more than five (5) clients, other than those specified in paragraph (i), who are residents of this state.

(2) An investment adviser representative if the investment adviser with whom it is associated is exempt under subdivision (1) of this section; and

(3) Other investment advisers or investment adviser representatives the director exempts by rule or order.

SECTION 2. This act shall take effect upon passage.