Yesterday, the Division of Investment Management of the U.S. Securities and Exchange Commission ("SEC") updated its Staff Responses to Questions About the Custody Rule. In the updated responses, the Division provided guidance for co-trustee arrangements. As a result of the new guidance, we have revised our Investment Adviser Compliance Alert published yesterday. For an updated version, please click here.
For your easy reference, the following are the specific changes that have been made to pages 3 and 4 of this Investment Adviser Compliance Alert:SEC Adopts to Custody Rule under Investment Advisers Act of 1940:
Serving as Trustee is Deemed to be Custody
If an investment adviser or its related persons serve as trustee, executor to an estate or conservator, that will cause the investment adviser to have custody. If a supervised person has any capacity that gives the supervised person legal ownership of, or access to, the client funds, then the investment adviser is deemed to have custody. The current rule provides no exception for the investment adviser or its related persons acting as a co-trustee. However, on March 10, 2010, the SEC's Division of Investment Management provided the following guidance regarding co-trustee arrangements.
Q: In some trusts, co-trustees are required either by law or the trust instrument in order to protect the trust beneficiaries from the actions of a single trustee acting alone. In these situations, no co-trustee is able to withdraw assets without the prior written consent of the other co-trustee(s). Would an adviser acting as trustee in this type of arrangement have custody of the trust's assets for purposes of the rule?
A: The Division would not consider an adviser to have custody in such circumstances, provided that (i) the trust has a co-trustee that is a bank or a trust company that meets the definition of a qualified custodian under rule 206(4)-2(d)(6) and is not a related person of the adviser, (ii) the qualified custodian delivers account statements directly to each co-trustee that is not itself the custodian, and (iii) under the trust instrument or by law the withdrawal of any assets of the trust by the adviser requires the prior written consent of all of its co-trustee(s). (Posted March 10, 2010.)
Q: For estate planning and other purposes, some people form revocable grantor trusts. With these trusts, the person who establishes and funds the trusts (the grantor) may revoke or modify the trust at will, including changing beneficiaries. If an adviser is co-trustee along with the grantor, would the adviser have custody of the trust's assets for purposes of the rule?
A: The Division would not consider an adviser to have custody under rule 206(4)-2 in such circumstances if (i) the adviser is prohibited by the trust instrument or by law from withdrawing any assets from the trust without the prior written consent of all of its co-trustees, (ii) each grantor who has contributed assets to the trust acts as co-trustee, and (iii) the qualified custodian delivers account statements directly to each co-trustee. (Posted March 10, 2010.)
See: http://www.sec.gov/divisions/investment/custody_faq_030510.htm
For your easy reference, the following are the specific changes that have been made to pages 3 and 4 of this Investment Adviser Compliance Alert:SEC Adopts to Custody Rule under Investment Advisers Act of 1940:
Serving as Trustee is Deemed to be Custody
If an investment adviser or its related persons serve as trustee, executor to an estate or conservator, that will cause the investment adviser to have custody. If a supervised person has any capacity that gives the supervised person legal ownership of, or access to, the client funds, then the investment adviser is deemed to have custody. The current rule provides no exception for the investment adviser or its related persons acting as a co-trustee. However, on March 10, 2010, the SEC's Division of Investment Management provided the following guidance regarding co-trustee arrangements.
Q: In some trusts, co-trustees are required either by law or the trust instrument in order to protect the trust beneficiaries from the actions of a single trustee acting alone. In these situations, no co-trustee is able to withdraw assets without the prior written consent of the other co-trustee(s). Would an adviser acting as trustee in this type of arrangement have custody of the trust's assets for purposes of the rule?
A: The Division would not consider an adviser to have custody in such circumstances, provided that (i) the trust has a co-trustee that is a bank or a trust company that meets the definition of a qualified custodian under rule 206(4)-2(d)(6) and is not a related person of the adviser, (ii) the qualified custodian delivers account statements directly to each co-trustee that is not itself the custodian, and (iii) under the trust instrument or by law the withdrawal of any assets of the trust by the adviser requires the prior written consent of all of its co-trustee(s). (Posted March 10, 2010.)
Q: For estate planning and other purposes, some people form revocable grantor trusts. With these trusts, the person who establishes and funds the trusts (the grantor) may revoke or modify the trust at will, including changing beneficiaries. If an adviser is co-trustee along with the grantor, would the adviser have custody of the trust's assets for purposes of the rule?
A: The Division would not consider an adviser to have custody under rule 206(4)-2 in such circumstances if (i) the adviser is prohibited by the trust instrument or by law from withdrawing any assets from the trust without the prior written consent of all of its co-trustees, (ii) each grantor who has contributed assets to the trust acts as co-trustee, and (iii) the qualified custodian delivers account statements directly to each co-trustee. (Posted March 10, 2010.)
See: http://www.sec.gov/divisions/investment/custody_faq_030510.htm
Labels: Custody
posted by bhill at 11:39 AM
Our Complimentary White Paper About the SEC's New Custody Rule for Investment Advisers Is Now Available
Due to overwhelming number of questions and apparent confusion among many federally registered investment advisers, we've prepared a complimentary white paper exploring the new custody rule of the United States Securities and Exchange Commission ("SEC"). This white paper provides details regarding the definition of custody, examples of custody and requirements under the new SEC rule. To obtain a copy of our white paper, please click here.
We are also encouraging chief compliance officers of investment adviser firms to review the SEC's recently updated set of frequently asked questions related to the SEC's new custody rule. Prior to the recent update on March 5, 2010, the SEC's Division of Investment Management last updated the FAQs in 2005. In order to review the updated FAQs, please click here.
Finally, you can learn more about the SEC's new custody rule, best practices for complying with the rule and ways to avoid being deemed to have custody by attending our webinar on Thursday, March 25 at 12:00 p.m. Central. This webinar will focus specifically on how the rule applies to pooled invest vehicles and investment advisers operating a qualified custodian or broker-dealer.
We are also encouraging chief compliance officers of investment adviser firms to review the SEC's recently updated set of frequently asked questions related to the SEC's new custody rule. Prior to the recent update on March 5, 2010, the SEC's Division of Investment Management last updated the FAQs in 2005. In order to review the updated FAQs, please click here.
Finally, you can learn more about the SEC's new custody rule, best practices for complying with the rule and ways to avoid being deemed to have custody by attending our webinar on Thursday, March 25 at 12:00 p.m. Central. This webinar will focus specifically on how the rule applies to pooled invest vehicles and investment advisers operating a qualified custodian or broker-dealer.
Labels: Custody
posted by bhill at 9:03 PM
Effective Date for SEC's New Custody Rule Is Less than 4 Weeks Away
Is your federally registered investment adviser firm ready for the SEC's new custody rule?
Join us Thursday, February 25, 2010 for our webinar exploring the new SEC requirements for investment adviser firms with custody. We will be discussing many common investment adviser practices that result in custody as defined by the SEC and answer pressing questions about the rules impact on investment advisers. The focus of the February 25th webinar will be on the deduction of advisory fees, acceptance of third-party checks from clients, trustee relationships, and other common custody situations for investment adviser firms.
On Thursday, March 25, 2010, we will be holding a second webinar devoted to the SEC's new custody rule. The focus of the March 25th webinar will be on investment adviser firms that are or have affiliated qualified custodians and investment adviser firms that own or operate pooled investment vehicles such as hedge funds, private real estate deals and other private placement securities.
Late last year, the SEC passed changes to Rule 206(4)-2 under the Investment Advisers Act of 1940. The definition of custody did not materially change. In fact the only real change is that the new definition clearly covers custody by a related person of the investment adviser. According to the SEC rule, custody means "holding, directly or indirectly, client funds or securities, or having any authority to obtain possession of them. You have custody if a related person holds, directly or indirectly, client funds or securities, or has any authority to obtain possession of them, in connection with advisory services you provide to clients. As defined under the rule, custody includes the following:
(i) Possession of client funds or securities (but not of checks drawn by clients and made payable to third parties) unless you receive them inadvertently and you return them to the sender promptly but in any case within three business days of receiving them;
(ii) Any arrangement (including a general power of attorney) under which you are authorized or permitted to withdraw client funds or securities maintained with a custodian upon your instruction to the custodian; and
(iii) Any capacity (such as general partner of a limited partnership, managing member of a limited liability company or a comparable position for another type of pooled investment vehicle, or trustee of a trust) that gives you or your supervised person legal ownership of or access to client funds or securities.
Investment advisers with custody must continue to make sure that all client funds and securities are held with a qualified custodian and make sure clients are given notice of the qualified custodian's name, address, and manner in which the funds and securities are maintained. The new rule requires that client's receive an account statement directly from the qualified custodian at least quarterly. Investment advisers must establish a reasonably believe, after due inquiry, that all clients are receiving account statements directly from the qualified custodian. Investment advisers may continue to send their own statements to clients so long as the statements include a legend in the statement urging clients to compare the statements they receive from the qualified custodian with those they receive from the investment adviser.
In addition to these requirements, investment advisers must hire an independent accounting firm to perform an annual surprise examination verifying the location of client funds and securities. To the relief of many investment advisers, the SEC was persuaded that the surprise verification examination will not provide materially greater protection to advisory clients when the investment adviser has custody of client assets solely because of its authority to deduct advisory fees from client accounts. Therefore, while fee deduction authority is custody, it has been exempted from the surprise examination requirement.
Investments advisers that act as the qualified custodian and investment advisers that use a related person qualified custodian will be subject to an annual internal control report. The internal control report must include an opinion of an independent public accountant as to whether controls have been placed in operation as of a specific date, and are suitably designed and are operating effectively to meet control objectives relating to custodial services, including the safeguarding of funds and securities held by either the investment adviser or the related person on behalf of clients, during the year. The independent public accountant must verify that the funds and securities are reconciled to a custodian other than the investment adviser or related person. Finally, the independent public accountant must be registered with, and subject to regular inspection as of the commencement of the professional engagement period, and as of each calendar year-end, by, the Public Company Accounting Oversight Board in accordance with its rules.
To hear more about the new custody rule, best practices for complying with the rule and ways to avoid being deemed to have custody, join us for our February 25th and March 25th webinars.
Join us Thursday, February 25, 2010 for our webinar exploring the new SEC requirements for investment adviser firms with custody. We will be discussing many common investment adviser practices that result in custody as defined by the SEC and answer pressing questions about the rules impact on investment advisers. The focus of the February 25th webinar will be on the deduction of advisory fees, acceptance of third-party checks from clients, trustee relationships, and other common custody situations for investment adviser firms.
On Thursday, March 25, 2010, we will be holding a second webinar devoted to the SEC's new custody rule. The focus of the March 25th webinar will be on investment adviser firms that are or have affiliated qualified custodians and investment adviser firms that own or operate pooled investment vehicles such as hedge funds, private real estate deals and other private placement securities.
Late last year, the SEC passed changes to Rule 206(4)-2 under the Investment Advisers Act of 1940. The definition of custody did not materially change. In fact the only real change is that the new definition clearly covers custody by a related person of the investment adviser. According to the SEC rule, custody means "holding, directly or indirectly, client funds or securities, or having any authority to obtain possession of them. You have custody if a related person holds, directly or indirectly, client funds or securities, or has any authority to obtain possession of them, in connection with advisory services you provide to clients. As defined under the rule, custody includes the following:
(i) Possession of client funds or securities (but not of checks drawn by clients and made payable to third parties) unless you receive them inadvertently and you return them to the sender promptly but in any case within three business days of receiving them;
(ii) Any arrangement (including a general power of attorney) under which you are authorized or permitted to withdraw client funds or securities maintained with a custodian upon your instruction to the custodian; and
(iii) Any capacity (such as general partner of a limited partnership, managing member of a limited liability company or a comparable position for another type of pooled investment vehicle, or trustee of a trust) that gives you or your supervised person legal ownership of or access to client funds or securities.
Investment advisers with custody must continue to make sure that all client funds and securities are held with a qualified custodian and make sure clients are given notice of the qualified custodian's name, address, and manner in which the funds and securities are maintained. The new rule requires that client's receive an account statement directly from the qualified custodian at least quarterly. Investment advisers must establish a reasonably believe, after due inquiry, that all clients are receiving account statements directly from the qualified custodian. Investment advisers may continue to send their own statements to clients so long as the statements include a legend in the statement urging clients to compare the statements they receive from the qualified custodian with those they receive from the investment adviser.
In addition to these requirements, investment advisers must hire an independent accounting firm to perform an annual surprise examination verifying the location of client funds and securities. To the relief of many investment advisers, the SEC was persuaded that the surprise verification examination will not provide materially greater protection to advisory clients when the investment adviser has custody of client assets solely because of its authority to deduct advisory fees from client accounts. Therefore, while fee deduction authority is custody, it has been exempted from the surprise examination requirement.
Investments advisers that act as the qualified custodian and investment advisers that use a related person qualified custodian will be subject to an annual internal control report. The internal control report must include an opinion of an independent public accountant as to whether controls have been placed in operation as of a specific date, and are suitably designed and are operating effectively to meet control objectives relating to custodial services, including the safeguarding of funds and securities held by either the investment adviser or the related person on behalf of clients, during the year. The independent public accountant must verify that the funds and securities are reconciled to a custodian other than the investment adviser or related person. Finally, the independent public accountant must be registered with, and subject to regular inspection as of the commencement of the professional engagement period, and as of each calendar year-end, by, the Public Company Accounting Oversight Board in accordance with its rules.
To hear more about the new custody rule, best practices for complying with the rule and ways to avoid being deemed to have custody, join us for our February 25th and March 25th webinars.
Labels: Custody
posted by bhill at 11:03 AM
Deadline Approaching for Filing the Form 13F with the SEC
Is your investment advisor firm required to file quarterly the Form 13F with the SEC?
According to Section 13(f) of the Securities Exchange Act of 1934, an institutional money manager that exercises investment discretion over $100 million of Section 13(f) securities must submit quarterly 13F reports to the U.S. Securities and Exchange Commission ("SEC"). Since a registered investment advisor firm meets the definition of an institutional money manager, it is subject to this rule when the investment advisor firm exercises investment discretion over $100 million of Section 13(f) securities.
An investment advisor firm that does not currently submit Form 13F reports with the SEC needs to verify that it did not exceed the 13(f) discretion threshold of $100 million at any time during calendar year 2009. To the extent your investment advisor firm exceeded $100 million of Section 13(f) securities any time during 2009, your investment advisor firm will need to file its first Form 13F by February 15, 2010. The Form 13F must report ending values as of December 31, 2009. Your investment advisor firm will then need to submit filings for quarters ending March, June, and September 2010, even if the market value of your Section 13(f) securities falls below the $100 million level.
Finally, current Form 13F filers that exceeded $100 million of discretionary 13(f) securities on the last trading day of at least one month during the year 2009 must also submit their fourth quarter 2009 reports by February 15, 2010.
According to Section 13(f) of the Securities Exchange Act of 1934, an institutional money manager that exercises investment discretion over $100 million of Section 13(f) securities must submit quarterly 13F reports to the U.S. Securities and Exchange Commission ("SEC"). Since a registered investment advisor firm meets the definition of an institutional money manager, it is subject to this rule when the investment advisor firm exercises investment discretion over $100 million of Section 13(f) securities.
An investment advisor firm that does not currently submit Form 13F reports with the SEC needs to verify that it did not exceed the 13(f) discretion threshold of $100 million at any time during calendar year 2009. To the extent your investment advisor firm exceeded $100 million of Section 13(f) securities any time during 2009, your investment advisor firm will need to file its first Form 13F by February 15, 2010. The Form 13F must report ending values as of December 31, 2009. Your investment advisor firm will then need to submit filings for quarters ending March, June, and September 2010, even if the market value of your Section 13(f) securities falls below the $100 million level.
Finally, current Form 13F filers that exceeded $100 million of discretionary 13(f) securities on the last trading day of at least one month during the year 2009 must also submit their fourth quarter 2009 reports by February 15, 2010.
Labels: Form 13F
posted by bhill at 1:31 PM
Does your Investment Adviser Have Effective Procedures to Monitor and Approve Performance Advertisements?
Advertising continues to be one of the primary focus areas of the SEC during investment adviser examinations. More specifically, performance advertising is one of the more common deficiencies found during SEC examinations and one that needs effective compliance oversight. During examinations, the SEC is interested in whether investment advisers have effective policies and procedures to make sure that their claims about past investment performance, their advertisements, and other marketing materials, among other things, contain accurate information, are not misleading, are not promissory, and have been reviewed by compliance.
Unfortunately, SEC Rule 206(4)-1 (Advertisements by Investment Advisers) under the Investment Advisers Act of 1940 provides little guidance on performance advertising. Much of the SEC's guidance is spelled out in no-action letters, with probably the most important one being Clover Capital Management, Inc., and enforcement actions. Investment advisers that regularly advertise performance need be familiar with the parameters outlined in Clover. The importance of Clover is heightened by the fact that the SEC staff, as a matter of policy, does not review specific advertisements except when conducting an examination of an investment adviser.
The following is a general summary of proper performance advertising compliance outlined by the SEC’s Division of Investment Management and Office of Compliance.
The SEC staff has said that, if you advertise your past investment performance record, you should disclose all material facts necessary to avoid any unwarranted inference. For example, SEC staff has indicated that it may view performance data to be misleading if it:
· does not disclose prominently that the results portrayed relate only to a select group of the adviser’s clients, the basis on which the selection was made, and the effect of this practice on the results portrayed, if material;
· does not disclose the effect of material market or economic conditions on the results portrayed (e.g., an advertisement stating that the accounts of the adviser’s clients appreciated in value 25% without disclosing that the market generally appreciated 40% during the same period);
· does not reflect the deduction of advisory fees, brokerage or other commissions, and any other expenses that accounts would have or actually paid;
· does not disclose whether and to what extent the results portrayed reflect the reinvestment of dividends and other earnings;
· suggests or makes claims about the potential for profit without also disclosing the possibility of loss;
· compares model or actual results to an index without disclosing all material facts relevant to the comparison (e.g., an advertisement that compares model results to an index without disclosing that the volatility of the index is materially different from that of the model portfolio); and
· does not disclose any material conditions, objectives, or investment strategies used to obtain the results portrayed (e.g., the model portfolio contains equity stocks that are managed with a view towards capital appreciation).
If your investment adviser utilizes performance advertising, you should attend our webinar, “Approving Performance Advertising,” on Wednesday, January 27, 2010 from 12:00 p.m. to 1:00 p.m. CST to learn more about developing strong compliance policies and procedures for preparing, approving and maintaining records related to performance advertising. During this webinar, our consultants will examine the SEC's advertising rule, the SEC no-actions concerning performance advertising and related SEC enforcement actions. RIA Compliance Consultants will provide best practices and disclosures for investment advisers utilizing performance advertising.
Labels: Advertising, Webinar
posted by bhill at 11:01 AM
Did your Firm Renew for 2010? Don't Forget About Form ADV Annual Amendments
Now that we are into a new year, can you confirm your registered investment advisor and its advisor representatives were properly renewed for 2010? Every year there are always a handful of firms that fail to submit renewal fees through the IARD system in a timely fashion. Therefore, even if you think the renewal payment was sent in time, please make sure your firm retrieves the Final Renewal Statement and confirms it is renewed for calendar year 2010.
The Final Renewal Statement will indicate one of the following.
Paid in Full - If your firm's renewal statement has been paid in full, the renewal process is complete. You should print a copy of the Final Renewal Statement and file it with your firm's books and records.
Outstanding Balance Due or Refund - If your firm paid its Preliminary Renewal Statement in full, but added or removed a state registration or advisor representative during the time period between the posting of Preliminary Renewal Statements and the 2009 shut down period, then your firm will either have additional fees due or receive a credit. If additional fees are due, the fees should be submitted as soon as possible, but must be posted by February 5, 2010. If your firm received a refund, the credit will automatically be transferred to your firm's Daily Account.
Failed to Renew - If a firm's Final Renewal Statement indicates Failed to Renew, FINRA did not receive the total balance due on the Preliminary Renewal Statement prior to the December deadline. In these cases, it is standard operating procedure for FINRA to automatically terminate all advisor representatives of the firm. In addition, over thirty states have given FINRA the authority to automatically terminate a registered investment advisor that does not pay its renewal fees in full. If your firm's statement indicates Failed to Renew, you will need to contact each state jurisdiction immediately to determine an appropriate course of action.
It is important to make sure your registered investment advisor submits all required documentation directly to the states where the firm is registered. If your firm failed to renew through IARD, it is important to take immediate action to rectify the situation. Give us a call to find out more about our re- registration services and pricing.
In addition to confirming your firm's registration renewal for 2010, we would like to remind registered investment advisors of their responsibility to prepare and file their Form ADV Part 1 Annual Amendment. The Annual Amendment must be filed no later than 90 days after a registered investment advisor firm's fiscal year ends. Many registered investment advisors use December 31 as their fiscal year end which results in a March 30, 2010 deadline to submit the Annual Amendment through the IARD system. The Annual Amendment is used to update information such as number of clients, number of accounts, and assets under management. We recommend registered investment advisors closely review the entire Form ADV to confirm all information is correct.
SEC registered firms should be aware that the SEC and FINRA have reinstated the annual IARD Firm System Processing Fee. The fee is assessed for the electronic filing of forms on the IARD system. The IARD Firm System Processing Fee is separate from applicable state Notice Filing fees. It must be paid by SEC registered firm when filing the Annual Amendment. Firms can begin working on the Annual Amendment, but will need to fund their IARD Daily Account before they can submit the Annual Amendment.
Please refer to the following schedule to determine your firm's annual fee and submit payment to your firm's IARD Daily Account. Be sure to fund the Daily Account; do not fund the Renewal Account: (a) for assets under management of less than $25 million, there's a fee of $40; (b) for assets under management between $25 million and $100 million, there's a fee of $150; and (c) for assets under management over $100 million, there's a fee of $200.
Please contact RIA Compliance Consultants, Inc. if you are interested in our Form ADV Annual Amendment services. We would also like to invite you to attend our upcoming webinar on January 14, "Preparing the Form ADV Part 1 Annual Amendment". The registration fee for our webinar is $59.95. During this webinar, RIA Compliance Consultants will discuss the items that must be updated as part of the Form ADV Part 1 Annual Amendment including how securities regulators expect a registered investment advisor to calculate assets under management. In addition, we will review common mistakes when preparing the Form ADV Part 1 Annual Amendment. Finally, we will cover some common examples of material changes that should have been updated to your Form ADV during the past year.
The Final Renewal Statement will indicate one of the following.
Paid in Full - If your firm's renewal statement has been paid in full, the renewal process is complete. You should print a copy of the Final Renewal Statement and file it with your firm's books and records.
Outstanding Balance Due or Refund - If your firm paid its Preliminary Renewal Statement in full, but added or removed a state registration or advisor representative during the time period between the posting of Preliminary Renewal Statements and the 2009 shut down period, then your firm will either have additional fees due or receive a credit. If additional fees are due, the fees should be submitted as soon as possible, but must be posted by February 5, 2010. If your firm received a refund, the credit will automatically be transferred to your firm's Daily Account.
Failed to Renew - If a firm's Final Renewal Statement indicates Failed to Renew, FINRA did not receive the total balance due on the Preliminary Renewal Statement prior to the December deadline. In these cases, it is standard operating procedure for FINRA to automatically terminate all advisor representatives of the firm. In addition, over thirty states have given FINRA the authority to automatically terminate a registered investment advisor that does not pay its renewal fees in full. If your firm's statement indicates Failed to Renew, you will need to contact each state jurisdiction immediately to determine an appropriate course of action.
It is important to make sure your registered investment advisor submits all required documentation directly to the states where the firm is registered. If your firm failed to renew through IARD, it is important to take immediate action to rectify the situation. Give us a call to find out more about our re- registration services and pricing.
In addition to confirming your firm's registration renewal for 2010, we would like to remind registered investment advisors of their responsibility to prepare and file their Form ADV Part 1 Annual Amendment. The Annual Amendment must be filed no later than 90 days after a registered investment advisor firm's fiscal year ends. Many registered investment advisors use December 31 as their fiscal year end which results in a March 30, 2010 deadline to submit the Annual Amendment through the IARD system. The Annual Amendment is used to update information such as number of clients, number of accounts, and assets under management. We recommend registered investment advisors closely review the entire Form ADV to confirm all information is correct.
SEC registered firms should be aware that the SEC and FINRA have reinstated the annual IARD Firm System Processing Fee. The fee is assessed for the electronic filing of forms on the IARD system. The IARD Firm System Processing Fee is separate from applicable state Notice Filing fees. It must be paid by SEC registered firm when filing the Annual Amendment. Firms can begin working on the Annual Amendment, but will need to fund their IARD Daily Account before they can submit the Annual Amendment.
Please refer to the following schedule to determine your firm's annual fee and submit payment to your firm's IARD Daily Account. Be sure to fund the Daily Account; do not fund the Renewal Account: (a) for assets under management of less than $25 million, there's a fee of $40; (b) for assets under management between $25 million and $100 million, there's a fee of $150; and (c) for assets under management over $100 million, there's a fee of $200.
Please contact RIA Compliance Consultants, Inc. if you are interested in our Form ADV Annual Amendment services. We would also like to invite you to attend our upcoming webinar on January 14, "Preparing the Form ADV Part 1 Annual Amendment". The registration fee for our webinar is $59.95. During this webinar, RIA Compliance Consultants will discuss the items that must be updated as part of the Form ADV Part 1 Annual Amendment including how securities regulators expect a registered investment advisor to calculate assets under management. In addition, we will review common mistakes when preparing the Form ADV Part 1 Annual Amendment. Finally, we will cover some common examples of material changes that should have been updated to your Form ADV during the past year.
Labels: Annual Amendment, Form ADV, IARD
posted by bhill at 9:35 AM
Recent Changes Regarding the Series 65 and Series 66 Examinations
Effective January 1, 2010, the North American Securities Administrators Association ("NASAA") has made some changes regarding the composition and the minimum passing score for the Series 65 and Series 66 Examinations.
The Series 65 is the Uniform Investment Adviser Law Examination, which is designed to qualify candidates as investment adviser representatives. The Series 65 Examination will continue to be comprised of 130 questions; however, effective January 1, 2010, the number of questions devoted to Legal and Regulatory Issues will decrease from 45 to 40 and the remaining 90 questions will cover Economic Concepts, including investment products, recommendations, and strategies and may include a few questions on Capital Markets Theory and specific types of accounts, such as College Savings Plans. Additionally, the Examination includes 10 questions which are considered pretest questions, which do not count towards the final grade. Effective January 1, 2010, the passing grade for the Series 65 Examination was increased from 68.5% to 72%.
The Series 66 is the Uniform Combined State Law Examination, which is designed to qualify candidates both as securities agents and investment adviser representatives. The Series 7 is considered a corequisite exam to the Series 66 and is required to be successfully completed in addition to the Series 66 before a candidate can register as a securities agent and investment adviser representative. The composition of the Series 66 Examination was significantly changed. The Series 66 Examination remains comprised of 100 questions; however, the number of questions testing knowledge of Legal and Regulatory Issues has decreased from 80 to 50 and the number of questions testing knowledge of Investment Recommendations, Strategies, and Products has increased from 20 to 50. Additionally, the Examination includes 10 questions which are considered pretest questions, which do not count towards the final grade. Effective January 1, 2010, the passing grade for the Series 66 Examination was increased from 71% to 75%.
The Series 65 is the Uniform Investment Adviser Law Examination, which is designed to qualify candidates as investment adviser representatives. The Series 65 Examination will continue to be comprised of 130 questions; however, effective January 1, 2010, the number of questions devoted to Legal and Regulatory Issues will decrease from 45 to 40 and the remaining 90 questions will cover Economic Concepts, including investment products, recommendations, and strategies and may include a few questions on Capital Markets Theory and specific types of accounts, such as College Savings Plans. Additionally, the Examination includes 10 questions which are considered pretest questions, which do not count towards the final grade. Effective January 1, 2010, the passing grade for the Series 65 Examination was increased from 68.5% to 72%.
The Series 66 is the Uniform Combined State Law Examination, which is designed to qualify candidates both as securities agents and investment adviser representatives. The Series 7 is considered a corequisite exam to the Series 66 and is required to be successfully completed in addition to the Series 66 before a candidate can register as a securities agent and investment adviser representative. The composition of the Series 66 Examination was significantly changed. The Series 66 Examination remains comprised of 100 questions; however, the number of questions testing knowledge of Legal and Regulatory Issues has decreased from 80 to 50 and the number of questions testing knowledge of Investment Recommendations, Strategies, and Products has increased from 20 to 50. Additionally, the Examination includes 10 questions which are considered pretest questions, which do not count towards the final grade. Effective January 1, 2010, the passing grade for the Series 66 Examination was increased from 71% to 75%.
Labels: IAR Licensing, Series 65
posted by bhill at 9:29 AM
House Financial Services Committee Advances Investor Protection Act
Here's our update regarding proposed changes to the regulation of investment advisers.
The Financial Services Committee of the U.S. House of Representatives advanced H.R. 3817, the Investor Protection Act, out of committee yesterday. According to the Financial Services Committee's press release, key provisions of this bill include the following:
The Financial Services Committee of the U.S. House of Representatives advanced H.R. 3817, the Investor Protection Act, out of committee yesterday. According to the Financial Services Committee's press release, key provisions of this bill include the following:
- an independent study of the regulatory structure for the securities industry;
- a doubling of the authorized fund for the U.S. Securities and Exchange Commission ("SEC") over five years;
- a requirement that every financial imtermediary who provides advice will have a fiduciary duty towards the customer; and
- an authorization for the SEC to prohibit mandatory arbitration provisions in customer contracts.
Although there was no reference in the Financial Services Committee's press release concerning the amendment to H.R. 3817 approved last week, which raises assets under management requirement from $25,000,000 to $100,000,000, this amendment will effectively result in many registered investment advisors being regulated at the state instead federal level.
Investment News is reporting that H.R. 3817 advanced out of committee with the controversial amendment that gives Financial Industry Regulatory Authority ("FINRA") regulatory authority over registered investment advisors, which are also dually registered as broker-dealers. According to Investment News, Financial Services Committee Chairman opposes this provision and will offer an amendment during the floor debate to strip out this provision from H.R. 3817.
Once the House releases a mark-up of H.R. 3817 as passed out of committee, RIA Compliance will share with its readers additional details about the proposed legislation.
Labels: Arbitration, Fiduciary, SEC, SRO
posted by bhill at 10:29 PM
