De-registration Looms for Mid-Sized Financial Advisers that Have Not Filed

July 05, 2012

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Mid-sized investment adviser firms that did not register with one or more state securities regulators by the June 28, 2012, deadline are in danger of being de-registered by the U.S.  Securities and Exchange Commission (SEC) as early as this week.  However, the first wave of terminations may not occur until September according to a staff member from the SEC who spoke with one of our Senior Compliance Consultants earlier this year.  Investment advisers that did not file an amendment to Form ADV Part 1 confirming their registration status by the March 31, 2012, deadline and/or have not filed a state registration application, if no longer SEC eligible; face the highest risk for untimely termination.

The Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) requires most mid-sized investment adviser firms with between $25-100 million in assets under management to switch from registration with the SEC to state securities regulators. The deadline for mid-sized investment advisers to make the switch and register with states was June 28, 2012. The SEC staff member speculated that investment advisers that are making the switch and filed their annual amendment to Form ADV Part 1 and state registration applications but are waiting on state securities regulators should be okay as long as they promptly comply with any additional requirements of the state securities regulators.

Investment advisers that are de-registered by the SEC and not approved at the state level must immediately cease holding themselves out as investment advisers, cease providing investment advice and may not receive fees from clients.  Any fees accepted during the time while the investment adviser is not registered must be returned to the clients.

The SEC announced the transition period for mid-sized investmetn adviser firms to move from SEC to state registration last year and began sending personal reminders to investment advisers in April of this year.  For an investmet adviser that has not properly registered, it is our understanding that the SEC will send out notices informing the adviser that it has 20 to 30 days to take action before facing de-registration.  According to the North American Securities Administrators Association (“NASAA”), an estimated 3,200 investment adviser firms are making the switch from SEC to state registration.

You need to take immediate action if your investment adviser firm has not filed a required state registration.  RIA Compliance Consultants can help. RIA Compliance Consultants can assist you with switching from SEC to state registration.  If you are an existing client of RIA Compliance Consultants interested in discussing how we can assist your investment adviser, please contact your consultant. If you are a new client that would like to speak with us regarding the services we can provide, please contact us to schedule a time to speak with one of our consultants.

Posted by Bryan Hill
Labels: How to Become RIA, Investment Advisor Registration, NASAA, Registration, SEC, Switch from SEC to State