Kansas and Louisiana Securities Regulators Require Submission of Written Supervisory Procedures When Registering as an Investment Adviser

August 27, 2012

A firm that wants to register as an investment adviser must at a minimum prepare and file the Form ADV through the Investment Adviser Registration Depository (“IARD”) system.  When registering as an investment adviser with a state securities regulator, an investment adviser is typically required to submit additional documentation directly to the state securities regulator.  An investment adviser applicant seeking registration with a state securities regulator should review the investment adviser registration requirements for each particular state where the investment adviser applicant is required to register since the requirements typically vary from state to state.

Like many state securities regulators, the Kansas’ Office of the Securities Commissioner and Louisiana’s Office of Financial Institutions require an investment adviser applicant to submit various documents in addition to the Form ADV. Where the Kansas’ Office of the Securities Commissioner and Louisiana’s Office of Financial Institutions’ investment adviser registration requirements differ from other state registration requirements is in requiring submission of a copy of the investment adviser’s written supervisory policies and procedures as part of the application for registration process.

To submit an initial application for investment adviser registration in Kansas, the Kansas Office of the Securities Commissioner requires:

  • Filing Form ADV Parts 1 and 2 with all applicable schedules and the appropriate fees electronically with the IARD;
  • Sending the following items to the Office of the Kansas Securities Commissioner
    1. Financial statements to demonstrate compliance with required adjusted net worth under the Kansas Securities Regulations;
    2. A copy of the investment advisory contract forms to be used for Kansas clients;
    3. A copy of the investment adviser’s written supervisory procedures;
    4. The investment adviser’s privacy policy;
    5. The qualified custodian’s new account form that includes the third-party trading authority; and
    6. Identification of one or more individual investment adviser representatives who will serve clients in Kansas pursuant to Kansas Securities Regulations. Investment adviser representatives must submit a Form U-4 with the appropriate fees through the Central Registration Depository (“CRD”) and meet certain examination requirements to properly register with the state.

To submit an application for investment adviser registration in Louisiana, the Louisiana Office of Financial Institutions requires an investment adviser to electronically file Form ADV Parts 1 and 2 and all applicable schedules and pay applicable fees through the IARD and submit directly to the Louisiana Office of Financial Institutions a balance sheet as of a date within 90 days prior to the filing date and that is prepared according to generally accepted accounting principles.  The Louisiana Securities Commissioner may require additional information as the Louisiana Securities Commissioner may deem necessary to establish whether an investment adviser applying for registration should be registered in Louisiana.  Most state securities regulators require an investment adviser to submit as part of the registration process, copies of any investment adviser client agreements the investment adviser will use. An investment adviser applicant for state registration in Louisiana whose firm’s principal office location is domiciled in Louisiana is required to submit the following to Louisiana’s Office of Financial Institutions:

  • Copies of all versions of investment advisory client agreements or contracts the investment adviser firm intends to use;
  • A list of documents that will be included in any versions of new client account kits the investment adviser intends to use;
  • An income statement for the investment adviser firm (prepared in accordance with generally accepted accounting principles that corresponds with the required submission of the firm’s current balance sheet;
  • Copies of any arrangements/agreements/contracts for loans made by or extended to the investment adviser which will be continued, or newly established, upon the investment adviser’s Louisiana registration approval;
  • Copies of privacy policy notice(s) to be given to the investment adviser’s clients;
  • A copy of the investment adviser’s written information security program;
  • Copies of any of the investment adviser’s other supervisory policies/procedures/compliance manuals;
  • Copies of all of the investment adviser’s employment & compensation arrangements/agreements/contracts for each individual (including independent contractors) who will serve as a Louisiana investment adviser representative for the investment adviser;
  • Copies of all applicable solicitor documents, if the investment adviser intends to utilize a solicitor or act as a solicitor;
  • Copies of all private placement memorandum(s), limited partnership agreement(s), subscription agreement(s), and gatekeeper arrangement(s), if the investment adviser’s business, in whole or part, will involve pooled investment vehicle(s) or hedge fund(s);
  • Copies of any agreements/contracts with broker/dealer firms (including wrap fee programs) that will be continued, or newly established, upon the investment adviser’s Louisiana registration approval; and
  • A list of all other affiliate and non-affiliate company arrangements/agreements/contracts with the investment adviser that will be continued, or newly established, upon the investment adviser’s Louisiana registration approval.

Investment adviser representatives that are required to be licensed in Louisiana must at a minimum meet the examination requirements of the Louisiana Office of Financial Institutions and submit a Form U4 and the appropriate state licensing fees through the CRD.

The investment adviser registration process can be time consuming and confusing for investment adviser applicants. The investment adviser registration requirements of each state securities regulator can vary, and failure to provide a state securities regulator with all required documents with your initial application for investment adviser registration will only prolong the registration process.  RIA Compliance Consultants can help with your firm’s investment adviser registration.  If you would like to speak with us regarding our turnkey investment adviser registration services, click here to schedule a time to speak with one of our compliance consultants.

Posted by Bryan Hill
Labels: How to Become RIA, Investment Advisor Registration, Kansas Investment Advisor, Louisiana Investment Advisor, Registration