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Wednesday, October 26, 2011

Preparing for IARD Renewals

As 2011 is quickly coming to an end, now is the time for each registered investment advisor to begin preparations for IARD renewals for the investment advisor firm and its investment advisor representatives. Registered investment advisors must make sure that they remain properly registered at all times.  If you are an SEC registered investment advisor, you must make sure that your investment advisor is notice filed in all required states.  If you are a state registered investment advisor, you must make sure your investment advisor is properly registered in all required states.  Generally, registration or notice filing is required at the firm level if an investment advisor has a place of business in the state or if it exceeds the state’s deminimus exemption.  However, investment advisors must review each state’s notice filing or registration requirements prior to conducting business in a particular state.  Investment advisor representative licensing is always handled at the state level.  Investment advisor firms must review and determine that all investment advisor representatives are properly licensed prior to conducting business in a state.

Although proper registration, notice filing, and licensing should be reviewed and monitored on an ongoing basis, during the annual renewal process all investment advisors are highly encouraged to review their existing registration or notice filing status and each investment advisor representative’s licensing status to determine if the investment advisor and its investment advisor representatives are properly registered, notice filed, or licensed (as applicable).  All registered investment advisors should also review the state requirements to see if branch office registration is required and, if it is, investment advisors should confirm that all branch office locations have been properly registered.  As of October 24, 2011, investment advisors may begin to submit Form U5s and Form BR Closing/Withdrawals via the IARD and/or Web CRD.  All post-dated forms must be dated 12/31/2011.

Here is a brief summary of some of the upcoming dates that your investment advisor should be aware of as it begins to prepare for the annual renewal process for your investment advisor firm and your investment advisor representatives:

  • 11/1/2011-Firms may begin to submit post-dated Forms ADV-W. All forms must be post-dated 12/31/2011.
  • 11/4/2011-All Transition Filing functionality for investment advisors is unavailable from 8 p.m. Eastern Time until 01/03/2012.
  • 11/12/2011-IARD and Web CRD are unavailable as Preliminary Renewals Statements are generating.
  • 11/14/2011-Preliminary Renewal Statements and reports are available for viewing and printing.

Click here for the full 2012 IARD Renewal Program Calendar.

Making necessary and early preparations for the annual renewal process can help streamline the event. Preliminary Renewal Statements must be paid, in full, by Monday, December 12, 2011. Because it takes approximately two days for payment to post to the IARD account, the funds should arrive no later than Thursday, December 08, 2011, to ensure the money is posted to your IARD account by December 12. If your investment advisor firm fails to pay its renewal fees in full, your investment advisor firm’s registration or notice filing status and investment advisor representatives’ licenses may be terminated effective December 31, 2011. An investment advisor that fails to properly renew its registration may face fines or further disciplinary actions for not being properly registered.

If your investment advisor needs assistance with the renewal process or determining if it is properly registered, RIA Compliance Consultants can assist you. Depending on your needs, RIA Compliance Consultants offers a variety of services to assist with the annual renewal process, preparing and filing the Form ADV Part 1 annual amendment, and switching from SEC to state registration (if applicable).  If you are an existing client of RIA Compliance Consultants interested in engaging us for assistance with these services, please contact your consultant to discuss the package options available. If you are a new client interested in these services, please click here to schedule a time to speak with one of our consultants.

Wednesday, October 19, 2011

Coordinated Examinations Result in the Release of Recommended Best Practices for Investment Advisers

As the approaching deadline nears for mid-size investment advisers (those with assets under management between $25 and $99 million) to switch from U.S. Securities and Exchange Commission (“SEC”) registration to state registration, many state securities regulators are making preparations for increased regulatory oversight. As these efforts are taking place, the North American Securities Administrators Associations (“NASAA”) recently released “an updated series of recommended best practices that investment advisers should consider to minimize the risk of regulatory violations.” These best practices were developed after a series of coordinated examinations were conducted between January 1, 2011 and June 30, 2011. Examinations were conducted by 45 state and provincial securities examiners of 825 investment advisers. According to Jack Herstein, NASAA President and Assistant Director of the Nebraska Banking and Finance Department, Bureau of Securities, “Our goal in identifying deficiencies and recommending best practices is to help investment advisers strengthen their internal compliance programs and improve the services they provide to clients.”

On October 3, 2011, the “2011 Coordinated IA Examination Report” was released revealing 3,543 total deficiencies in 13 categories. Registration, books and records, unethical business practices, supervision and advertising had the greatest number of deficiencies.

The findings of the coordinated examination prompted NASAA to recommend the following best practices for investment advisers as a guide to assist advisers in developing compliance practices and procedures.

  • Review and revise Form ADV and disclosure brochure annually to reflect current and accurate information;
  • Review and update all contracts;
  • Prepare and maintain all required records, including financial records.  Back-up electronic data and protect records.  Document checks forwarded;
  • Prepare and maintain client profiles;
  • Prepare a written compliance and supervisory procedures manual relevant to the type of business to include business continuity plan;
  • Prepare and distribute a privacy policy initially and annually;
  • Keep accurate financials.  File timely with the jurisdiction.  Maintain surety bond if required;
  • Calculate and document fees correctly in accordance with contracts and ADV;
  • Review all advertisements, including website and performance advertising, for accuracy;
  • Implement appropriate custody safeguards, if applicable;
  • Review solicitor agreements, disclosure, and delivery procedures.

For more information on switching from SEC to state registration, click here to register for RIA Compliance Consultants’ free webinar, Understanding and Preparing for the ‘Switch’ for Mid-Sized Advisors,” hosted October 20, 2011 at 12:00 p.m. central.

RIA Compliance Consultants can assist you with the switch from SEC to state registration or with updating your firm’s policies and procedure to address areas referenced in NASAA’s best practice list.  To discuss our services and to see how we can help you with the registration transition, click here to speak to one of our Senior Compliance Consultants.

Tuesday, October 18, 2011

2012 IARD Renewal & Form ADV Annual Amendment Requirements

Beginning Monday, November 14, 2011, registered investment advisor firms can access their 2012 Preliminary Renewal Statements via their IARD account. The Preliminary Renewal Statement must be paid, in full, by Monday, December 12, 2011. Because it takes approximately two days for payment to post to the IARD account, the funds should arrive no later than Thursday, December 08, 2011, to ensure the money is posted to your IARD account by December 12. Click here for the full 2012 IARD Renewal Calendar.

RIA Compliance Consultants also wants to remind registered investment advisor firms of their obligation to update Form ADV on at least an annual basis in the form of an Annual Amendment. This is required under U.S. Securities and Exchange Commission (“SEC”) Rule 204-1 of the Investment Advisers Act of 1940 and similar rules of state securities regulators. The Form ADV Annual Amendment must be completed within 90 days after a registered investment advisor firm’s fiscal year end. This year, all SEC registered investment advisors must file an amendment by March 30, 2012 to indicate whether they are eligible to remain SEC registered. Since the majority of investment advisor firms coordinate their fiscal year end with the end of the calendar year, the Form ADV Annual Amendment has become a requirement that must be completed at the beginning of each year for most advisor firms. This will mean that the eligibility filing will be done with the fiscal year end filing for many firms but not all.

RIA Compliance Consultants can assist you with renewals and Form ADV amendment needs, which for many firms may include the switch from SEC to state registration this year. 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 2012. We can also help you with any Form ADV amendment filings once we determine which type of filing is appropriate for your firm. If you are an existing client of RIA Compliance Consultants interested in engaging us for assistance with your renewals and Form ADV amendment filing, please contact your consultant to discuss the package options available. If you are a new client interested in these services, please click here to schedule a time to speak with one of our consultants.

Engagements for annual renewal services received by RIA Compliance Consultants after November 30 are subject to availability so contact us soon to discuss the available options!

*If you are an annual retainer client of RIA Compliance Consultants, renewal and Form ADV Annual Amendment Services are included in your retainer agreement. If you are required to switch from SEC to state registration you will need to contact your consultant to discuss service options. To learn more about our retainer services and fees, please contact your consultant or schedule a time to speak with one of our consultants via the link provided above.

Monday, October 17, 2011

Notice for Mid-Sized Investment Adviser Firms Transitioning to California State Registration

On October 7, 2011 the California Department of Corporations issued a notice to mid-sized investment adviser firms transitioning to California state registration. According the release, current investment adviser firms that are regulated under the U.S. Securities and Exchange Commission (“SEC”) that are considered mid-sized investment adviser firms (with assets under management between $25 and $100 million), are highly encouraged to file as soon as possible the appropriate state application and paperwork to transition to regulation under the State of California. The California Department of Corporations is anticipating a “high volume of transition applications, which will be reviewed in the order received.” The release also advised investment adviser firms to respond promptly to any requests for additional information and/or application revisions. The release highlighted some important dates for investment advisers to note:

  • “All SEC Investment Advisers must file an annual updating amendment before March 30, 2012, whether you have a pending State Application or have not yet submitted a [California] application. Your firm can submit the CA Application at the same time the annual updating amendment is filed.”
  • “If your firm’s application is submitted and approved prior to January 1, 2012, you may elect to either have your firm’s CA registration approved for 2011 OR request that the [California Department of Corporations] hold the completed application and approve it effective January 1, 2012.” Those firms that receive approval prior to January 1, 2012 and wish to be approved for CA registration for 2011 would be required to pay two renewal fees, once in 2011 and again in 2012.”

For additional information regarding transitioning your investment adviser firm from SEC to California state registration, please click here to register for RIA Compliance Consultants free webinar, hosted October 20, 2011 at 12:00 Central.

Monday, October 17, 2011

RIA Compliance Consultants Now on Facebook

RIA Compliance Consultants is excited to announce the addition of our firm’s facebook page. In the ever increasing use of social media to communicate, RIA Compliance Consultants is eager to have a simple way to keep our clients updated on compliance matters relating to your investment adviser firm.

RIA Compliance Consultants strives to update our facebook page regulatory; our facebook page provides instant access to our regulatory alerts and compliance tips. We post up-to-date compliance articles and are able to offer complimentary webinar recordings and sample forms. The goal behind our facebook page is to keep your investment adviser firm informed and abreast of compliance matters.

If you’d like access to our regulatory alerts, compliance tips and periodic release of complimentary webinar recordings and sample forms, please click here to “Like” RIA Compliance Consultants on facebook now.

Clicking the “Like” button does not constitute a testimonial for or endorsement of RIA Compliance Consultants, any associated person, or our services. “Like” is not meant in the traditional sense; the clicking of the “Like” button is merely a mechanism to circulate our Facebook page. RIA Compliance Consultants requests that any postings to our Facebook page should refrain from recommending us or providing testimonials for our compliance consulting firm.

Tuesday, October 4, 2011

Broker Dealers and Investment Advisers Need to Have Policies and Procedures in Place for Social Media Use

A recent FINRA enforcement action highlights the need for broker dealers and investment advisers to implement policies and procedures for social media use. FINRA alleged the registered representative created websites related to her firm without obtaining firm approval, on several occasions she falsely stated online that she was not affiliated with any broker dealer, and she was using her Twitter account to give stock recommendations without making the necessary disclosures.   As a result of this alleged conduct, FINRA fined her $10,000 and suspended her from associating with a broker dealer for one year.

This FINRA enforcement action should serve as another reminder that if you have not already done so, it is time to implement policies and procedures that address retention of online communication, supervision of representatives’ use of social media, and how your firm will be represented online. While the US Securities and Exchange Commission (“SEC”) has not released any guidance on social media use, FINRA has issued Regulatory Notice 10-06 and Regulatory Notice 11-39 which provide guidance on using social networking sites for business communications. Although FINRA rules do not govern an investment adviser firm (which is not a FINRA member), these FINRA regulatory notices provide a good reference point in lieu of the absence of specific guidance from the SEC.

If you would like to learn how the SEC’s existing advertising rules apply to the use of social media by your investment adviser or its investment adviser representatives and best practices for supervising such social media usage, please purchase a seat for $59.95 to our upcoming webinar, “Compliance for Social Media,” on Thursday, October 13, 2011 at 12:00 p.m. Central by clicking here. If you would like to discuss how RIA Compliance Consultants, Inc. can help your registered investment advisor update its written policies and procedures with respect to social media usage, please schedule a time through our online calendar.  Simply click here and select an available time that is convenient for you.  One of our consultants will then give you a call at your selected time.

Monday, October 3, 2011

Client Feedback Webinar Survey

RIA Compliance Consultants is committed to providing quality webinars filled with informative regulatory tips and up to date compliance matters. In efforts to ensure our clients are receiving the best possible webinar presentations, we have compiled a short, six question survey that we ask you take the time to complete. Your answers will help us improve the content of the webinars we provide for your benefit. Any feedback is greatly appreciated.

Please click here to take this short, six minute survey regarding our compliance webinars.

Thank you for your time and we look forward to hearing from you.

Tuesday, September 27, 2011

New SEC Rule Requires “Large Traders” to Make Additional Filing

The U.S. Securities and Exchange Commission (“SEC”) recently adopted Rule 13h-1 that would require “large traders” to file new Form 13H with the SEC through its Electronic Data Gathering, Analysis and Retrieval (EDGAR) System.

Rule 13h-1 defines “large trader” as any person or entity, including investment advisers, that “directly or indirectly, including through other persons controlled by such person, exercises investment discretion over one or more accounts and effects transactions for the purchase or sale of any [exchange-listed] security for or on behalf of such accounts, by or through one or more registered broker-dealers, in an aggregate amount equal to or greater than” either 2 million shares or $20 million in a single day; or 20 million shares or $200 million in a calendar month.  This means that any entity that places trades that qualify as “large trades” and has investment discretion over an account, not the account holder, will have to file Form 13H.  There are a limited number of exceptions to the definition of “large trader” including trades related to gifts, distributions of estates, court-ordered transactions, exercises or assignments of options contracts, and the creation of ETFs.

The information requested by Form 13H includes basic identifying information, the name of the organization and any affiliates, an organization chart, a description of the nature business, a list of forms the business filed with the SEC, the names of each general partner and execute officers, directors or trustees, and a list of broker-dealers where the trader has an account.  The Form 13H will be kept confidential by the SEC and will be exempt from Freedom of Information Act requests.

After Form 13H has been submitted to the SEC, the SEC will assign the trader an identification number known as an LTID.  This LTID must be given to any registered broker-dealer where the trader maintains an account.  The broker-dealer is required to maintain certain records for each transaction for these accounts and upon request must provide that information to the SEC.

Rule 13h-1 comes into effect on October 3, 2011 and organizations that will be required to file Form 13H have until December 1, 2011 to do so.  If an organization has not recently placed any trades that would require it to register as a “large trader”, it can file a Form 13H now or it can wait and file the Form 13H within ten days of qualifying as a “large trader.”  After making an initial Form 13H filing, “large traders” must continue to file Form 13H annually.  Further, if any information contained within the form becomes inaccurate or out-dated, an amended filing must be made by the end of the calendar quarter.  If an organization has filed a Form 13H, but during the previous calendar year did not place a trade that qualified as a “large trade,” it can make a filing to request “inactive” status and re-activate whenever necessary.

Tuesday, September 27, 2011

The Use of Social Media Sites Can Create Compliance Problems for Registered Investment Advisers

Social media sites such as Facebook, Twitter, and LinkedIn can be useful business tools for investment advisers.  However, there are several compliance issues that social media sites present.

While the US Securities and Exchange Commission (“SEC”) has not released any specific rules or guidance on the topic, there are several existing rules that investment advisers need to keep in mind when using social media sites.  Information posted online by an adviser is considered an advertisement and therefore must comply with all advertising regulations, including record retention which can be difficult for an ever changing site.  Further, comments posted by a client could be considered a testimonial, which are banned by Rule 206(4)-1 of the Investment Advisers Act of 1940.

In addition to these issues, each site presents its own compliance challenge.  For example, LinkedIn allows users to make recommendations for other users.  While these recommendations could be useful in promoting your business, they are considered client testimonials which are prohibited by Rule 206(4)-1.  Another example is the “Like” function on Facebook.  Some commentators are concerned that if a client “Likes” an investment adviser’s page, the regulator might consider this as a client testimonial and not a method for merely accessing or circulating the Facebook page.

To address these issues, on October 13, 2011 RIA Compliance Consultants will be hosting a webinar, “Compliance for Social Media Sites.”  At this webinar, one of our compliance consultants will provide guidance regarding record retention and developing policies and procedures relating to social media websites.  You can register for this webinar by clicking here.

Thursday, September 22, 2011

Massachusetts Investigating Social Media Use By Investment Advisers

The Massachusetts Securities Division recently sent out a survey to track use of social media by investment advisory firms for business purposes.  The survey not only asked about social media use but asked whether investment advisory firms have supervisory policies and procedures in place for social media supervision and record retention.

The results of the survey showed that 44% of investment advisers currently use social media for business purposes and that 10% of the advisers who do not currently use social media plan to start using it within the next 12 months.  More importantly, the results showed that many of the investment advisers currently using social media do not have the proper policies and procedures in place.  As a result of this survey, the Massachusetts Securities Division “believes that additional regulatory guidance concerning the use of social media would be appropriate” and is forming a “Working Group” to develop social media compliance guidelines for investment advisors.

To comply with current regulatory requirements, investment advisors who use social media need to have policies and procedures in place for employee supervision and record retention of content posted online through social media sites.  On Thursday, October 13, 2011, RIA Compliance Consultants will be conducting a webinar, “Compliance for Social Media Sites.”  During this webinar we will be discussing the current regulatory requirements related to social media use and how to develop policies and procedures to comply with these requirements.  You can purchase a seat for $59.95 for this webinar by clicking here.


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* RIA Compliance Consultants, Inc. ("RCC") is not a law firm and does not provide legal services. A compliance consulting relationship with RCC is not provided those legal and professional protections that normally exist under an attorney-client relationship. For more information, please visit our Disclosures webpage.

The determination to use a third-party compliance services provider is an important decision and should not be based solely upon advertisements or self-proclaimed expertise. A description or indication of limitation of our compliance services does not mean that an agency or board has certified RCC as a specialist or expert in investment advisor compliance. All potential clients are urged to make their own independent investigation and evaluation of RCC.

About RIA Compliance Consultants, Inc.
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