Nonesense. To rule such a way makes a complete shame of Initiative.No it doesn't. It requires the person BE a threat and be noticed.
I've said in the past, the spirit of the rule appears to be that you see something dangerous at least half a second before it hits you. If so, you aren't surprised as there's time to dodge out of the way.
If you are talking to someone and they suddenly pull out a weapon, you have the time required to pull out the weapon, get into a fighting stance, close the distance to you and attack in order to react. You aren't surprised. Even if they have the weapon in their hand, you still have the time required to get into a fighting stance and swing the weapon.
From my view of the rules, this is the difference between surprised and not surprised:
Surprised - I'm walking through the market buying apples. Suddenly there is a pain in my side. I look down and there is a crossbow bolt sticking out of me. I look up and I see a guy in a cloak hiding behind a nearby stall holding a crossbow and pointing it at me.
Not Surprised - I'm walking through the market buying apples when I notice someone hiding behind a stall pointing a crossbow at me, his finger on the trigger ready to fire. I still have half a second to react. If I react quick enough I can still get over to him and attack before he presses the trigger. Now we determine who reacts faster by rolling initiative.
The key is that if you are able to see the person when he starts the attack, you have time to react to it before it finishes. Which is why, in some rare circumstances, I will allow people who have already been seen get surprise against someone by leaving their sight before attacking.
For instance: I'm have having a negotiation with 2 diplomats, we are discussing trade agreements between our two countries. One of them gets up and says he is going to get more tea. I believe him. Then the other one starts telling me what terms they would like in the trade deal and I'm so distracted, I forget to look behind me. I feel the dagger buried in my back without even realizing that the other one snuck up on me.
But I adjudicate this situation the same way I do all other Surprise situations. The person sneaking up needs to make a Stealth check vs PP and they need to be unseen to start hiding. But, as per the rules, the DM can determine that a creature is so distracted by something that you can sneak up on them even without cover to hide behind.
However, it should be noted that even in this situation, Surprise is still determined the same way: Stealth vs PP and if the target is unaware of any threat then they are surprised.
If the situation was instead that the two diplomats, in the middle of negotiations started casting spells or pulled out weapons and attack, that isn't surprise. I see you pull out weapons or start casting a spell and I have the ability to react before you finish.
That's what Initiative's for: Determining whether X has time to act before Y.
If no-one has weapons drawn at combat start, they have to wait for their turn to draw said weapon.
Additionally, even if someone is a threat, and is noticed, if they're not identified as a threat, then a threat has not been noticed. You determine surprise from the perspective of the creature being surprised.