Follow-up Information for the Webinar, “The Switch Is On Again For RIAs”

August 29, 2011

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A lot of important information regarding the upcoming requirement for mid-sized advisors to switch from SEC to state registration was provided during the recent webinar, “The Switch is On Again for RIAs,” hosted by Advisor4Advisor and presented by Tammy Emsick of RIA Compliance Consultants.  Therefore, we would like reiterate a few of the main points presented during this webinar.

Investment advisors with less than $25 million in assets under management will continue to be state registered and advisors that qualify for SEC registration will continue to notice file with the appropriate state regulatory authorities.  Investment advisors with assets under management between $25 million and $100 million (“mid-sized advisors”) will need to switch from SEC to state registration unless the advisor is not required to be registered as an investment advisor with the state securities authority in the state where it maintains its principal office and place of business; the advisor is not subject to examination as an advisor in the state where it maintains its principal office and place of business; or the advisor qualifies for an exemption under Rule 203A-2 of the Investment Advisers Act of 1940.

The following are the key dates that all investment advisors currently registered with the SEC will need to be aware of:

  • All mid-sized investment advisors registered with the SEC as of July 21, 2011, must remain SEC registered until after January 1, 2012.
  • All investment advisors registered with the SEC as of January 1, 2012 are required to file an amendment to their Form ADV Part 1 by March 30, 2012.  This is regardless of the firms fiscal year end, although it may coincide with the Form ADV annual update filing for many SEC investment advisors.
  • By June 28, 2012, all mid-sized investment advisors that no longer qualify for SEC registration after January 1, 2012 must become state registered and file a Form ADV-W to withdraw from SEC registration.
  • After June 28, 2012 the SEC will cancel registrations of investment advisors no longer eligible to register with the SEC that fail to file the Form ADV amendment or withdraw their registrations.

Mid-sized advisors may be able to start applying for registration with state securities regulators at this time, but the investment advisor should first check with the appropriate state securities regulator(s) to make sure the state will not object to the investment advisor´s dual registration as an investment advisor with the state securities regulator and the SEC until the firm is able to withdraw from SEC registration after January 1, 2012. Every state securities regulator has its own investment advisor registration requirements and additional documentation may be required to be submitted along with the Form ADV.  In the SEC final rule release regarding the switch, the SEC indicated that they estimate approximately 3,200 SEC registered investment advisors will be required to withdraw their registrations and register with one or more state securities authorities.  This will likely mean that state regulators are going to be extremely busy reviewing registration applications during the first six-months of 2012.  Investment advisors that need to switch to SEC registration should plan accordingly so that they will meet all of the required deadlines.

Finally, investment advisors that switch to state registration must keep in mind that along with making changes to the Form ADV, advisors’ client agreements and written supervisory procedures will probably need to be updated.

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