SEC Modifies Standard for Accredited Investors

January 04, 2012

The U.S. Securities and Exchange Commission (“SEC”) has modified the rules used to determine whether an individual is qualified to invest in certain unregistered securities offerings.  The amendments were adopted as part of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”).

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Form ADV Annual Amendment Filings

January 03, 2012

For most registered investment advisers, it is now time to file an amendment to your Form ADV.  Pursuant to Rule 204-1 under the Investment Advisers Act of 1940 (“Advisers Act”), all investment advisers registered with the U.S. Securities and Exchange Commission (“SEC”) must file an amendment to the Form ADV at least annually, within 90 days of the investment adviser’s fiscal year end and more frequently if required by the instructions to Form ADV.  Most state securities regulators have similar rules and the Form ADV Instructions specifically indicate that the update instructions apply to “SEC and State Registered Advisers.”

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Understanding the Revisions Made to Form ADV Part 1 for Investment Advisers

December 21, 2011

Earlier this year, the U.S. Securities and Exchange Commission (“SEC”) adopted rule changes under the Investment Advisers Act of 1940 in order to implement Title IV of the Dodd-Frank Wall Street Reform and Consumer Protection Act.  One of the more significant rule changes impacts all registered investment advisers as it centers on revisions to the Form ADV Part 1. Beginning January 1, 2012, all investment advisers registered with the SEC will have 90 days to complete and submit the revised Form ADV Part 1 confirming their eligibility to remain SEC registered.  Investment advsiers registered with the SEC with November, December, January and February fiscal year ends are reminded they must also file their official Form ADV Part 1 Annual Amendment within 90 days of their fiscal year end and will likely choose to file their SEC eligibility amendment and annual amendment in conjunction.

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Investment Advisers May Be Required to Implement Anti-Money Laundering Policies and Procedures

December 05, 2011

Registered investment adviser may soon be required to monitor client accounts for money laundering activities.  James Freis, the director of the U.S. Treasury’s Financial Crimes Enforcement Network (“FinCEN”), recently announced that FinCEN and the U.S. Securities and Exchange Commission (“SEC”) are working together to finalize anti-money laundering regulations that would apply to investment advisers.  The proposed rule would likely require investment advisers to implement anti-money laundering policies and procedures and would also require them to report suspicious activity to the appropriate authorities.

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IARD Renewal Deadline Quickly Approaching & Information Regarding Annual Amendment

November 30, 2011

In order for an investment adviser to maintain active state registration or notice filing statuses, as well as active state registration statuses for investment adviser representatives licensed under an investment adviser firm, renewal fees must be paid, in full, by all investment advisers by no later than December 12, 2011. Investment advisers need to be sure to allow sufficient time for submitted funds to be processed and reflected in the renewal account; it is highly encouraged that investment advisers submit their renewal payments electronically by no later than December 8, 2011. If renewal fees are submitted by check via the U.S. postal service, the investment adviser must account for delivery and processing time. It is important to remember that failure to pay renewal fees in full and on time may result in the termination of your investment adviser firm and its investment representative’s active registration statuses. Additionally, many jurisdictions also impose fines against investment advisers that fail to renew properly.

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The Benefits of Implementing a Compliance Calendar

November 29, 2011

For many registered investment advisers, the task of determining ongoing compliance requirements can seem overwhelming. Carrying out an investment adviser’s ongoing compliance duties can be a very manageable process if the investment adviser is aware of its requirements and organizes and assigns responsibilities for the various compliance functions. A compliance calendar can be a valuable tool to assist investment advisers in carrying out their ongoing compliance duties throughout the year. Developing a compliance calendar can help strengthen an investment adviser’s compliance program that must be developed to detect, prevent, and correct possible regulatory violations that can occur throughout the year.

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SEC Enforcement Actions Against Investment Advisors Increased 30% During 2011

November 17, 2011

The U.S. Securities and Exchange Commission (“SEC”) recently announced that during its previous fiscal year, enforcement actions against registered investment advisers increased thirty percent over the 2010 fiscal year.  During the 2011 fiscal year, which ended in September, the SEC filed a total of 146 enforcement actions against investment advisers and investment companies.  For a point of reference, from 2006-2009 the SEC filed on average 82 enforcement actions against registered investment advisers.

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Make Sure You Properly Renew Your Investment Adviser Firm and Representative Registrations

November 09, 2011

Investment adviser firms and investment adviser representatives must maintain active registrations and/or notice filing statuses with applicable jurisdictions/states. Investment advisers should be aware that renewing registrations includes paying all applicable renewal fees by December 12, 2011. Unless properly renewed, all investment adviser firm and representative registrations will expire on December 31st of each calendar year. Failure to maintain active registration or failing to properly renew registration may be detrimental to an investment advisor firm.  Investment adviser firms and investment adviser representative that are not properly renewed may become ineligible to conduct business affected jurisdictions effective January 1, 2012.  Additionally, certain regulators may assess fines against those firms or representatives that fail to properly renew.

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Professor Suggests Using External Auditors to Increase Investment Adviser Examinations

November 04, 2011

Section 914 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) required the U.S. Securities and Exchange Commission (“SEC”) to review the frequency of investment adviser examinations and to consider various ways to increase the frequency of such examinations, such as forming an investment adviser self-regulatory organization (“SRO”).  As a result, Congress has begun to look at different ways to increase the frequency of examinations of investment advisers.  The solutions that have been proposed and are being debated include forming an independent SRO, giving FINRA the authority to serve as the investment adviser SRO, increasing the SEC’s funding, charging investment advisers a user fee, or shifting the regulatory authority to the Bureau of Consumer Financial Protection.  James Angel, a professor at Georgetown University’s McDonough School of Business has proposed another solution.  In his article titled “On the Regulation of Investment Advisory Services:  Where do we go from here?” Angel suggests that the best solution to provide increased regulatory oversight of investment advisers is to require investment advisers to hire external auditors to conduct compliance reviews.  Angel’s research paper was supported by a grant from TD Ameritrade and his research paper indicates that his research included numerous conversations with broker, regulators, advisors, scholars and industry trade groups.

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