The SEC charged an investment advisor with fraud for lying to clients about how brokerage commission rebates, or “soft dollars,” were being used and producing phony documents to cover up the fraud during an SEC examination. The SEC alleges that … Continued
A proposal to turn over the supervision of financial advisers to a self-regulatory organization (SRO) gained the support of SEC Chairperson Mary Schapiro. The SEC has the resources to conduct annual examinations of only 9% of U.S. registered advisers, who … Continued
The SEC (and the Department of Labor) postponed efforts to extend a fiduciary standard to more financial advisers. “It’s extremely unlikely that there will be a rule this year,” an SEC official says.
Dear Compliance Professional, The protection of a client’s non-public personal information is one of the most important tasks entrusted to an investment adviser. Unfortunately, it is also one of the most vexing issues confronting compliance professionals. Any time an adviser … Continued
Item 5 is the part of the ADV 1 that requests information about an investment adviser’s business, including information about employees, clients and advisory activities. Again, these changes are part of the SEC’s goal to collect more and more information … Continued
Following a recent survey of state-registered investment advisers, the Massachusetts Division of Securities has determined that additional regulatory guidance concerning the use of social media is necessary. The Survey required responses to a variety of questions as to each investment … Continued
The revised Instructions to Item 2 in the ADV Part 1 requires certain “mid-sized” advisers (e.g., those advisers with between $25 million and $100 million in regulatory AUM) to remain registered with the SEC. The Instructions state that a mid-sized … Continued
I spoke with a senior state regulator who told me point blank that the best thing I can tell clients who need to transition from SEC to state registration due to the increased AUM threshold, is start early. She said … Continued
My previous post discussed the new range of choices in Item 2 for SEC registration. While most of the options were already familiar, the “large adviser” and “mid-sized” adviser options were new. This post discusses the attendant changes to the … Continued
Item 2 is the section of Form ADV Part 1 that determines whether an adviser is eligible to register (or remain registered) with the SEC. To implement the new prohibition on registration for mid-sized advisers (e.g., those advisers with between … Continued
Dear Compliance Professional, The adoption by the SEC of a series of rules intended to effectuate certain provisions of the Dodd-Frank Wall Street Reform Act has ushered in many significant changes for investment advisers. Some of those changes (e.g., the … Continued
Spoke at length with a state regulator the other day. His exact quote: “Registration transition is going to be complete chaos.”
GET STARTED EARLY The state process can be quite protracted under ordinary circumstances. There will be nothing ordinary when thousands of transitioning advisers begin to overwhelm limited state resources.
NET CAPITAL REQUIREMENTS Determine if any net capital or net worth requirements apply. Usually, advisers with custody (even if it is only custody as a result of direct fee deduction) have to meet certain net capital requirements. Some states will … Continued
DOCUMENTS Determine what documents must be filed as part of the state registration process, review and update those documents if you already have them and/or draft new documents if necessary. States have very specific rules about what should be in … Continued
DETERMINE STATES OF REGISTRATION One of things you can do now to help ease your transition from SEC registration to registration with one or more states is determine the state(s) in which you must register. Seems obvious, huh? Just wait. … Continued
REGISTER FIRST – WITHDRAW SECOND The most important thing to remember about transitioning from SEC to state registration (other than to actually do it if you have less than $90 million in AUM) is do not – repeat, do not … Continued
We now know that at the $90 million asset under management threshold, approximately 3,300 SEC-registered advisers will be required to transition to registration with one or more states. Quite a few of these transitioning SEC advisers are positively giddy with … Continued
Recently enacted SEC rules have clarified the assets under management requirement for SEC registration. While $100 million in AUM is the figure that has caught everybody’s attention, the actual workings of the new threshold are a bit more complicated. If … Continued
Dear Compliance Professional, I hope this finds all of you and your families up and down the East Coast safe and sound. Earthquakes and hurricanes – two phenomena not usually associated with this neck of the woods (or Colorado, for … Continued