Single Family Office Not Required to Register with SEC
The SEC recently granted an order under Section 202(a)(11)(G) of the Investment Advisers Act of 1940 (“Advisers Act”) declaring that a particular “family office” and its employees, when acting within the scope of their employment, are not required to register as investment advisers pursuant to Section 203(a) of the Advisers Act. The SEC granted this order because it found that the applicant and its employees are not within the intent of Section 202(a)(11) of the Advisers Act which defines the term “investment adviser”. Section 202(a)(11)(G) allows the SEC to designate by rule, regulation, or order that certain persons are not within the intent of the definition of an “investment adviser.”
This particular “family office” filed an application on behalf of itself and its employees for an order based on the following:
Based on the information provided by the applicant, the SEC granted an order declaring that the applicant and its employees are not persons within the intent of Section 202(a)(11) of the Advisers Act. This means that registration is not required.
This particular “family office” filed an application on behalf of itself and its employees for an order based on the following:
- The applicant and its employees operate as a “family office” providing advisory services to family members only. This includes estate accounts, entities, trusts, and foundations all of which are wholly owned, funded, and for the benefit of the family and its lineal descendents.
- The applicant is and will at all times be owned, directly or indirectly, exclusively by one or more family members and its Board of Directors will at all times be, at a minimum, made up by members of the family.
- The applicant provides advice regarding various investments in addition to other services but does not and will not provide investment advice to any person that is not a family member.
- The applicant only charges fees that are sufficient to cover its costs for providing services. The applicant’s fee structure is not designed to generate a profit.
- The applicant will not hold itself out to the public as an investment adviser and will not be listed in the phone book or any other directory as an investment adviser.
- The applicant will not engage in any advertising or conduct marketing activities and it will not solicit or accept as an investment advisory client any person that is not a family member.
Based on the information provided by the applicant, the SEC granted an order declaring that the applicant and its employees are not persons within the intent of Section 202(a)(11) of the Advisers Act. This means that registration is not required.
Labels: Registration, SEC
posted by bhill at 2:26 PM
2008 IARD Annual Renewal and Form ADV Annual Amendment Requirements
Beginning Monday, November 5, 2007, investment advisor firms can access their 2008 Preliminary Renewal Statements via their IARD account. The Preliminary Renewal Statement must be paid, in full, by Monday, December 10, 2007. Because it takes approximately two days for payment to post to the IARD account, the funds should arrive no later than Thursday, December 6, 2007, to ensure the money is posted to your IARD account by the 10th.
We also want to remind firms of their obligation to amend the Form ADV on at least an annual basis in the form of an Annual Amendment. This is required under Rule 204-1 of the Investment Advisers Act of 1940 and similar state rules. The Annual Amendment must be completed within 90 days after an advisor firm's fiscal year end. Since the majority of advisor firms coordinate their fiscal year end with the end of the calendar year, the Annual Amendment has become a requirement that must be completed at the beginning of each year for most firms. The main item that must be updated on the Annual Amendment is the firm's assets under management. Other items such as, but not limited to, the number of accounts, clients, employees, and advisor representatives should also be updated. The Annual Amendment can also be used to disclose any material changes. Keep in mind, however, that material changes need to be disclosed within 30 days no matter when they take place. Material changes include items such as, but are not limited to, reportable disciplinary and financial disclosures, changes in advisory programs, changes in fee arrangements and changes in billing practices.
RIA Compliance Consultants is offering a special package that includes assistance with completing both the annual renewal requirement and filing the Annual Amendment to Form ADV Part 1. For the low price of $455, RIA Compliance Consultants will help your firm confirm its registration status in all necessary jurisdictions and confirm the registration status of all investment advisor representatives for 2008. You will also receive an Annual Amendment Questionnaire which we will help you complete so that we may prepare and file your Form ADV Part 1 Annual Amendment within the necessary timeframe.
Please contact us today to receive an agreement for our services. Note: Engagements received after November 15 are subject to availability.
*If you are an RIA Compliance Consultants’ annual retainer client, this service is included in your retainer agreement. To learn more about our retainer services and fees, please contact us at 877-345-4034.
We also want to remind firms of their obligation to amend the Form ADV on at least an annual basis in the form of an Annual Amendment. This is required under Rule 204-1 of the Investment Advisers Act of 1940 and similar state rules. The Annual Amendment must be completed within 90 days after an advisor firm's fiscal year end. Since the majority of advisor firms coordinate their fiscal year end with the end of the calendar year, the Annual Amendment has become a requirement that must be completed at the beginning of each year for most firms. The main item that must be updated on the Annual Amendment is the firm's assets under management. Other items such as, but not limited to, the number of accounts, clients, employees, and advisor representatives should also be updated. The Annual Amendment can also be used to disclose any material changes. Keep in mind, however, that material changes need to be disclosed within 30 days no matter when they take place. Material changes include items such as, but are not limited to, reportable disciplinary and financial disclosures, changes in advisory programs, changes in fee arrangements and changes in billing practices.
RIA Compliance Consultants is offering a special package that includes assistance with completing both the annual renewal requirement and filing the Annual Amendment to Form ADV Part 1. For the low price of $455, RIA Compliance Consultants will help your firm confirm its registration status in all necessary jurisdictions and confirm the registration status of all investment advisor representatives for 2008. You will also receive an Annual Amendment Questionnaire which we will help you complete so that we may prepare and file your Form ADV Part 1 Annual Amendment within the necessary timeframe.
Please contact us today to receive an agreement for our services. Note: Engagements received after November 15 are subject to availability.
*If you are an RIA Compliance Consultants’ annual retainer client, this service is included in your retainer agreement. To learn more about our retainer services and fees, please contact us at 877-345-4034.
Labels: Form ADV, Registration, Renewals
posted by bhill at 5:20 PM
Broker/Dealer Exemption Rule Vacated
In a 2-1 decision issued at the end of March, the U.S. Court of Appeals for the District of Columbia Circuit threw out what is commonly referred to as the Merrill Lynch Rule, formally known as Rule 202(a)(11)-1 of the Investment Advisers Act of 1940. Under this rule, the SEC exempted certain broker-dealers from investment advisor registration even if the broker-dealers provide what many contend to be advisory services and charge a fee for such services. From its inception, the Financial Planning Association fought the rule and ultimately received a successful outcome with last week's ruling. In the ruling, Judge Judith Rogers and Judge Brett Kavanaugh noted that the SEC exceeded its authority by exempting brokerage firms that charge asset-based fees from registration under the Advisers Act.
While RIA Compliance Consultants, Inc. agrees with the ruling, we do not think this will have much of an effect on our current clients, who are already registered as investment advisors. This ruling will affect broker-dealers that have been relying on the rule to avoid investment advisor registration. It should be noted that the rule remains in effect until the D.C. court's decision is final, which should occur on May 21, 2007, unless the SEC requests a rehearing. If your firm is interested to learn about the steps necessary to become registered as an investment advisor, please contact us and ask for Jarrod James, Senior Compliance Consultant. RCC offers a comprehensive turnkey approach to investment advisor registration at competitive prices. We also invite you to check out the Registration Services and FAQ – IA Registration pages of our website.
While RIA Compliance Consultants, Inc. agrees with the ruling, we do not think this will have much of an effect on our current clients, who are already registered as investment advisors. This ruling will affect broker-dealers that have been relying on the rule to avoid investment advisor registration. It should be noted that the rule remains in effect until the D.C. court's decision is final, which should occur on May 21, 2007, unless the SEC requests a rehearing. If your firm is interested to learn about the steps necessary to become registered as an investment advisor, please contact us and ask for Jarrod James, Senior Compliance Consultant. RCC offers a comprehensive turnkey approach to investment advisor registration at competitive prices. We also invite you to check out the Registration Services and FAQ – IA Registration pages of our website.
Labels: Registration, SEC
posted by bhill at 2:34 PM
Is It Time to Register with the SEC?
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.
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.
Labels: Form ADV, Registration
posted by bhill at 9:57 AM
Is It Time to Register with the SEC?
It's likely that your investment advisor firm is currently working on its Form ADV annual amendment since it must be filed within ninety (90) days after an advisor's fiscal year end. You should pay particular attention to updating the firm's assets under management since regulators have stated an advisor's assets under management must be current as of 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 states. If a firm's assets under management are between $25 million to $30 million, the firm can choose between SEC or state registration.
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? 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.
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 states. If a firm's assets under management are between $25 million to $30 million, the firm can choose between SEC or state registration.
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? 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.
Labels: Registration
posted by bhill at 3:13 PM
Qualifications for IAR
As a follow-up to our previous entry, we thought we would discuss the general licensing qualifications that state regulators impose for investment advisor representatives. The following are the standard licensing requirements that states will accept as a qualification for investment advisor representative licensing:
1. Series 65, NASAA Uniform Investment Adviser Law Examination, or
2. Series 7, NASD General Securities Representative Examination, and Series 66 NASAA Uniform Combined State Law Examination, or
3. One of the following professional designations:
a. Certified Financial PlannerT, CFP®
b. Chartered Financial Analyst, CFA
c. Chartered Financial Consultant, ChFC
d. Personal Financial Specialist, PFS
e. Chartered Investment Counselor (CIC)
Many states accept additional qualifications, exemptions, and waivers. It is always best to refer to a specific state's regulations to determine its requirements. Some states do not even license advisor representatives. Currently, Michigan and Minnesota do not license advisor representatives; however, each state may require an advisor firm to disclose associated persons acting in an advisory capacity. New York does not license advisor representatives either; however, it does require state registered firms to report their advisor representatives and provide proof of qualification. A final state to note, Wyoming, does not regulate advisors at all. Advisor firms in Wyoming must be registered with the SEC.
1. Series 65, NASAA Uniform Investment Adviser Law Examination, or
2. Series 7, NASD General Securities Representative Examination, and Series 66 NASAA Uniform Combined State Law Examination, or
3. One of the following professional designations:
a. Certified Financial PlannerT, CFP®
b. Chartered Financial Analyst, CFA
c. Chartered Financial Consultant, ChFC
d. Personal Financial Specialist, PFS
e. Chartered Investment Counselor (CIC)
Many states accept additional qualifications, exemptions, and waivers. It is always best to refer to a specific state's regulations to determine its requirements. Some states do not even license advisor representatives. Currently, Michigan and Minnesota do not license advisor representatives; however, each state may require an advisor firm to disclose associated persons acting in an advisory capacity. New York does not license advisor representatives either; however, it does require state registered firms to report their advisor representatives and provide proof of qualification. A final state to note, Wyoming, does not regulate advisors at all. Advisor firms in Wyoming must be registered with the SEC.
Labels: IAR Licensing, Registration
posted by bhill at 10:31 PM
IA Branch Office Registration
Does your investment advisor firm have an office location in a state that requires branch office registration? If so, have all of your office locations been properly reported to the appropriate state regulatory office? Depending on whether your firm is SEC or State registered, your firm may need to register its investment advisor office locations in states that require such filings. These requirements are in addition to reporting office locations on the ADV Part I.
Beginning on Monday, October 31, Web CRD will be updated to facilitate the filing of advisor firm branch office filings. In addition, some states will also require branch office renewal fees to be paid through Web CRD. To read the NASAA press release concerning this new Web CRD functionality and view a table of states that will require branch office filings through Web CRD, click here.
Regardless of whether your firm is SEC or state registered, if the firm has a physical office location in a state, the firm will need to be notice filed (if SEC registered) or registered (if at the state level) in that state. A notice filing or registration is also needed for firms that advertise in a state. For states in which an advisor firm simply has clients, the firm must be aware of the state's client de minimus exemption. Of course there are exceptions to these general guidelines and states have different requirements for the licensing of advisor representatives. If you have any questions on where your firm, representatives, or branch offices need to register, give us a call.
Beginning on Monday, October 31, Web CRD will be updated to facilitate the filing of advisor firm branch office filings. In addition, some states will also require branch office renewal fees to be paid through Web CRD. To read the NASAA press release concerning this new Web CRD functionality and view a table of states that will require branch office filings through Web CRD, click here.
Regardless of whether your firm is SEC or state registered, if the firm has a physical office location in a state, the firm will need to be notice filed (if SEC registered) or registered (if at the state level) in that state. A notice filing or registration is also needed for firms that advertise in a state. For states in which an advisor firm simply has clients, the firm must be aware of the state's client de minimus exemption. Of course there are exceptions to these general guidelines and states have different requirements for the licensing of advisor representatives. If you have any questions on where your firm, representatives, or branch offices need to register, give us a call.
Labels: IARD, Registration
posted by bhill at 10:30 AM
Registration for Advisors to Private Funds
By now, you are probably aware that advisors to private funds (a/k/a hedge funds or pooled investments) need to register as investment advisors if they provide advice on securities to private funds. (To learn more, please read the SEC's rule release.) The SEC is requiring these advisors to become registered by February 1, 2006. While we recommend submitting your filing with the SEC as soon as possible (preferably before December 1, 2005), an applicant needs to have all its ducks in a row before filing.
The rumor on the street is that the SEC is seeking opportunities to audit newly registered advisors to private funds. In fact, we have heard of at least one firm being audited within weeks of SEC approval. The key to surviving an SEC audit is to understand the Investment Advisers Act of 1940 and then prepare in detail your documents and procedures in accordance with these requirements.
In order to register, the SEC merely requires the submission of the Form ADV Part I, which is probably the simplest form to complete and file. Nonetheless, when the SEC conducts an examination, it will be focused upon ensuring that the advisor firm has properly completed the Form ADV Part II with sufficient details regarding advisory services, fees, conflicts of interests, and outside business activities. The SEC will also conduct a thorough review of the firm's supervisory and procedures manual, client agreements, and required books and records.
As an advisor to a hedge fund, you may be anxious about the SEC's looming registration deadline; however we strongly recommend that you refrain from submitting the ADV Part I at this relatively early juncture (in late August) if your firm hasn't completed the entire ADV, established a written compliance program, and started to follow the SEC books and records requirements.
The rumor on the street is that the SEC is seeking opportunities to audit newly registered advisors to private funds. In fact, we have heard of at least one firm being audited within weeks of SEC approval. The key to surviving an SEC audit is to understand the Investment Advisers Act of 1940 and then prepare in detail your documents and procedures in accordance with these requirements.
In order to register, the SEC merely requires the submission of the Form ADV Part I, which is probably the simplest form to complete and file. Nonetheless, when the SEC conducts an examination, it will be focused upon ensuring that the advisor firm has properly completed the Form ADV Part II with sufficient details regarding advisory services, fees, conflicts of interests, and outside business activities. The SEC will also conduct a thorough review of the firm's supervisory and procedures manual, client agreements, and required books and records.
As an advisor to a hedge fund, you may be anxious about the SEC's looming registration deadline; however we strongly recommend that you refrain from submitting the ADV Part I at this relatively early juncture (in late August) if your firm hasn't completed the entire ADV, established a written compliance program, and started to follow the SEC books and records requirements.
Labels: Hedge Funds, Registration
posted by bhill at 9:25 PM
Does Your Investment Advisory Firm Need to Register with the SEC?
There are several criteria that qualify your firm for registration with the SEC as an investment advisor. For example, if your firm is registered with 30 or more states, you should rely on the multi-state rule and register with the SEC. If you are located in Wyoming, your firm must register with the SEC because the State of Wyoming does not regulate advisors. Investment advisors to investment companies must register with the SEC as well. To see a full listing of the SEC registration criteria, simply refer to your Form ADV Part 1. Item 2 details the different SEC registration criteria.
(Regardless of whether your firm is required to be registered with the SEC, all individuals serving as investment advisor representatives still must be registered with the applicable state regulators.)
By far, the most common determination for SEC registration is an advisor firm's assets under management (AUM). Rule 203A-1 of the Investment Advisors Act of 1940 states that all advisor firms with AUM over $30 million must be registered with the SEC. Firms with AUM below $25 million must register directly with state regulators (excluding Wyoming, of course). Regulators do provide a "buffer zone" so advisor firms can choose between the two sets of regulatory bodies when their AUM falls between $25 and $30 million.
Calculating your advisor firm's AUM can be complicated. While the ADV Part 1 does give instructions on how to calculate AUM, it can still be confusing. This is especially true when a firm has relationships with sub-advisors and/or third party money managers.
If your firm has questions on how to calculate its AUM or other questions about registering with the SEC or a particular state, please contact us. We can provide guidance on AUM calculations and help your firm meet the supervisory requirements expected of all SEC registered investment advisors.
(Regardless of whether your firm is required to be registered with the SEC, all individuals serving as investment advisor representatives still must be registered with the applicable state regulators.)
By far, the most common determination for SEC registration is an advisor firm's assets under management (AUM). Rule 203A-1 of the Investment Advisors Act of 1940 states that all advisor firms with AUM over $30 million must be registered with the SEC. Firms with AUM below $25 million must register directly with state regulators (excluding Wyoming, of course). Regulators do provide a "buffer zone" so advisor firms can choose between the two sets of regulatory bodies when their AUM falls between $25 and $30 million.
Calculating your advisor firm's AUM can be complicated. While the ADV Part 1 does give instructions on how to calculate AUM, it can still be confusing. This is especially true when a firm has relationships with sub-advisors and/or third party money managers.
If your firm has questions on how to calculate its AUM or other questions about registering with the SEC or a particular state, please contact us. We can provide guidance on AUM calculations and help your firm meet the supervisory requirements expected of all SEC registered investment advisors.
Labels: Registration
posted by bhill at 8:14 AM
