SEC Publishes Frequently Asked Questions Regarding Switch of “Mid-Size” Investment Advisers

July 21, 2011

The U.S. Securities and Exchange Commission (“SEC”) posted a webpage with frequently asked questions regarding the switch of “mid-size” investment adviser ($25 million to $100 million of assets under management) from the SEC to state securities regulator(s).

Although the initial information about the “mid-size” investment adviser switch on this webpage is somewhat limited, there are at least two new pieces of information worthy of discussion.

First, the SEC only identifies New York and Wyoming as the states where a “mid-size” investment adviser would not be subject to examination by a state securities regulator.  (Under the SEC’s new switch rule, a “mid-size” investment adviser with a principal place of business in a state that does not require the investment advisor to register or does not examine investment advisers is required to remain registered with the SEC.)   This appears to be contrary to the comments of the SEC staff during the Commission’s open meeting on the final rule a few weeks ago and the adopting release dated June 22, 2011 when Minnesota was also mentioned by SEC staff as a state where a “mid-size” investment adviser would not be subject to an examination by a securities regulator.   As result, it currently appears as if a “mid-size” investment adviser with a principal place of business in Minnesota will be subject to the regulator switch from the SEC and be required to register as an investment adviser with the State of Minnesota Department of Commerce.

Second, although not well publicized by the securities industry press, the SEC has made several changes to the Form ADV Part 1.  The Form ADV Part 1 items have been amended to reflect the new investment adviser registration requirements.  Additionally, there are several items that have been revised that are not related to the new investment adviser registration requirements for mid-size investment advisers.  When filing an amendment to the Form ADV Part 1 after the new updated form is released on IARD, all (even if not a “mid-size”) investment advisers will need to review the entire Form ADV Part 1 and provide the additional information requested.  It is expected that the IARD will be able to accept filings of the revised Form ADV Part 1 by January 1, 2012.  Click here to view a PDF file of the amended Form ADV Part 1.

If your firm falls into the definition of a “mid-size” investment adviser, RIA Compliance Consultants is presenting a complimentary webinar, “Understanding and Preparing for the ‘Switch’ of Mid-Sized Advisors,” on Wednesday, August 25, 2011 at 12:00 p.m. Central.  This webinar will provide an overview of the SEC’s new switch rule and discuss timing for any new requirements under this rule.  During this webinar, we will also discuss which investment advisers will be covered by these changes and what actions these investment advisers will need to take in order to comply with the new requirements to switch from SEC to state registration.  If you would like to attend this complimentary webinar, click here to register.

Posted by Bryan Hill
Labels: SEC, Switch from SEC to State