SEC Announced Plans to Cancel Registration for Approximately 300 Investment Advisers Due to Failure to File Form ADV Amendments Related to Switch

October 24, 2012

On October 19, 2012, the U.S. Securities and Exchange Commission (“SEC”) issued a release indicating that the SEC intended to cancel the registrations of approximately 300 investment advisers due to failure to file an amendment to their Form ADV in the first quarter of 2012 indicating whether the firm remained eligible for registration with the SEC or who submitted an amended Form ADV indicating that they are no longer eligible to remain registered with the SEC as an investment adviser but have not filed the Form ADV-W to withdraw their registration.

As part of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) signed into law on July 21, 2010, most mid-sized investment adviser firms with between $25 and $100 million in assets under management were required to switch from investment adviser registration with the SEC to registration with state securities regulators. The deadline for mid-sized investment advisers to make the switch and register with state securities regulators was June 28, 2012. According to the release issued by the SEC staff, the SEC “…contacted SEC-registered investment advisers before and after the filing deadlines to remind them of their filing obligations under rule 203A-5 and to withdraw from [SEC] registration by filing Form ADV-W if no longer eligible. Accordingly, the [SEC] believes that reasonable grounds exist for a finding that these registrants are no longer in existence, are not engaged in business as investment advisers, or are prohibited from registering as investment advisers under section 203A, and that their registrations should be cancelled pursuant to section 203(h) of the Act.”

If an investment adviser is listed in the SEC’s release as facing cancellation, the investment adviser should take immediate action.  The investment adviser listed as facing cancellation may prevent the cancellation of its investment adviser registration by filing a Form ADV amendment indicating that it is eligible for SEC registration.  If the investment adviser has already registered as an investment adviser with one or more state securities regulators, then the investment adviser should file a Partial Form ADV-W to withdraw its SEC registration. The Form ADV amendment or a Form ADV-W must be received by the SEC by December 17, 2012, in order to prevent the cancellation of the investment adviser’s SEC registration.

In general, an investment adviser that is de-registered by the SEC and not registered as an investment adviser with a state securities regulator must immediately cease holding itself out as an investment adviser, cease providing investment advice and may not receive fees from clients.  Any fees accepted during the time while the investment adviser is not registered must be returned to the clients.

If your investment adviser firm would like assistance completing your Form ADV amendments or Form ADV-W, please click here to speak to one of our Senior Compliance Consultants to see how we may assist your firm.

To access the SEC’s release in its entirety, please click here.

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