Is It Time to Register with the SEC?

February 02, 2007

Because many firms have a December 31 fiscal year-end, it is likely that your investment advisor firm is currently working on its Form ADV Part 1 Annual Amendment. The Annual Amendment must be submitted through the IARD within ninety (90) days after an advisor’s fiscal year-end. While there are other criteria for registering with the SEC, by far the most common test for SEC registration is a firm’s assets under management. Therefore, for a large majority of firms, when completing the Annual Amendment, an advisor firm must pay close attention to updating the firm’s assets under management. Regulators, both at the federal and state levels, have stated an advisor’s assets under management must be current as on the firm’s most recently completed fiscal year.

Once you’ve calculated your investment advisor’s assets under management, you must determine whether your firm will need to change from a state to SEC registration or conversely from an SEC to state registration. When a firm’s assets exceed $30 million, the firm must be registered directly with the SEC. A firm with assets under $25 million must register with the applicable individual state. If a firm’s assets under management are between $25 million and $30 million, the firm can choose between SEC or state registration. (Check out our FAQ’s page here to learn more about some of the more common factors when determining SEC v. state registration.)

Be careful to not simply lump all accounts and assets together when calculating assets under management. The Form ADV Part 1 provides detailed instructions for counting assets under management and regulators will scrutinize how assets under management tally and the basis for including discretionary accounts versus non-discretionary accounts.

If your firm’s assets under management now exceed $30 million (or are significantly above $25 million) for the first time, do you know the steps that must be taken to register with the SEC? Has your firm developed a code of ethics and set of written supervisory policies and procedures? Are you ready for an SEC examination? Will your firm’s Form ADV pass federal scrutiny?

If you need help calculating assets under management, completing the Form ADV Annual Amendment or filing your registration with the SEC, please give us a call.

Posted by Bryan Hill
Labels: Form ADV, How to Become RIA, Investment Advisor Registration, Registration