The North American Securities Administrators Association (NASAA) announced that the Investment Adviser Registration Depository System (IARD), the national database sponsored by NASAA and the U.S. Securities and Exchange Commission (SEC) that provides investment adviser firms and their investment adviser representatives a single source for filing state and SEC investment adviser registration and notice filings, will waive the IARD system processing fees for state registered investment adviser firms in 2016. While waiving IARD system processing fees for state registered investment adviser firms in 2016, NASAA will continue charging a $10 IARD system processing fee for each investment adviser representative (IAR).
Category Archives: SEC
The U.S. Securities and Exchange Commission (SEC) continues to promote the importance of cybersecurity and protecting confidential investor information. On September 22, 2015 the SEC’s Office of Investor Education and Advocacy issued an Investor Alert regarding investment accounts if they become victims of identity theft or a data breach. This Investor Alert came one week after the SEC issued a Risk Alert on the topic of its Cybersecurity Exam Initiative (September 15, 2015).
The SEC’s Cybersecurity Enforcement Action and Risk Alert
September 25, 2015
The Securities and Exchange Commission (SEC) had a busy week regarding investment adviser and broker-dealer cybersecurity. On September 15, 2015 the SEC’s Office of Compliance Inspections and Examination (OCIE) issued a Risk Alert on the topic of its Cybersecurity Examination Initiative. The Risk Alert provides information on the areas of focus for OCIE’s cybersecurity examination (more on this below). The SEC followed up its Risk Alert with an enforcement action against an investment adviser for a cybersecurity incident. The SEC censured the investment adviser and imposed a fine of $75,000. The SEC found that the investment adviser failed to adopt written policies and procedures reasonably designed to protect customer records and information, in violation of Rule 30(a) of Regulation S-P (17 C.F.R. § 248.30(a)) (the “Safeguards Rule”).
To the extent your investment adviser firm claims that its principal office and place of business is located in Wyoming and therefore eligible for registration with U.S. Securities and Exchange Commission (“SEC”) regardless of the amount of assets under management since the State of Wyoming does not register investment advisers, you should pay close attention to a recent SEC administrative proceeding. The SEC found that the sole investment adviser representative/owner of the investment adviser firm resided in another state where he maintained a home office and operated as his primary base. The investment adviser representative/owner utilized the Wyoming offices on an infrequent basis and did not generally direct, control or coordinate activities from Wyoming. Consequently, the SEC found the investment adviser firm violated Section 203A of the Investment Advisers Act of 1940 by improperly registering with the SEC based upon its misrepresentations that the investment adviser firm’s principal office and place of business was in Wyoming. The SEC ordered the investment adviser to cease and desist, censured the investment adviser firm, fined the investment adviser in the amount of $10,000 and required the investment adviser to establish its principal office and place of business in Wyoming and provide evidence thereof.
SEC’s 2015 Examination Priorities for Investment Advisers
January 13, 2015
The Office of Compliance Inspections and Examinations (“OCIE”) of the U.S. Securities and Exchange Commission (“SEC”) released its selected 2015 examination priorities for investment advisers, broker-dealers and transfer agents. Click here to view.
SEC Examination Focus on Investment Adviser “Dual Registrants”
August 19, 2014
Earlier this year the Securities and Exchange Commission (“SEC”) National Exam Program (“NEP”) published its Examinations Priorities for 2014. “Dual Registrants” was listed as one of the most significant initiatives across the entire NEP. This is the second year in a row that the NEP has referenced dually registered investment advisers and broker-dealers in its published examination priorities. This focus does not only apply to firms that have both a broker-dealer registration and an investment adviser registration but it extends to any investment adviser firm whose representatives are also licensed as representatives with a broker-dealer. The 2014 release indicates that, “The convergence among broker-dealer and investment adviser representative activity continues to be a significant risk. For example, representatives of dual registrants, i.e., registrants that are both broker-dealers and investment advisers, and affiliated advisers and broker-dealers may influence whether a customer establishes a brokerage or investment advisory account. This influence may create a risk that customers are placed in an inappropriate account type that increases revenue to the firm and may not provide a corresponding benefit to the customer.”
Under Rule 206(4)-1(a)(1) of the Investment Advisers Act of 1940 (Advisers Act), an investment adviser is prohibited from publishing, circulating, or distributing any advertisement that refers, directly or indirectly, to any testimonial of any kind concerning the investment adviser or concerning any advice, analysis, report or other service rendered by the investment adviser. With today’s wide spread use of social media, there has been a lot of concern among investment advisers regarding what would constitute a testimonial when using social media. In March 2014, the U.S. Securities and Exchange Commission (SEC), Division of Investment Management, issued a Guidance Update to provide some guidance on the testimonial rule and social media. Through this guidance, the SEC Division of Investment Management is seeking “to clarify application of the testimonial rule as it relates to the dissemination of genuine third-party commentary that could be useful to consumers.”
SEC Examination Priorities for 2014
February 19, 2014
On January 9, 2014, the Office of Compliance Inspections and Examinations (“OCIE”) National Examination Program (“NEP”) of the U.S. Securities and Exchange Commission (“SEC”) published its examination priorities for 2014. This report is published to “communicate with investors and registrants about areas the that the staff perceives to have heightened risk and to support the [SEC] mission to protect investors; to maintain fair, orderly, and efficient markets; and to facilitate capital formation.”
Identity Theft and Wire Fraud Policies and Procedures
November 19, 2013
The compliance date, November 20, 2013, for the SEC’s Regulation S-ID: Identity Theft Red Flags Rule is quickly approaching. If your investment adviser is required to comply with these new rule requirements, you must have policies and procedures in place to address risks of identity theft by the November 20, 2013, compliance date. Every investment adviser should take the appropriate steps to protect its clients from identity theft and wire order fraud, even if it is not required to comply with Regulation S-ID.
Investment Advisers Must Take Steps to Protect Their Clients from Identity Theft and Third-Party Wire or Check Fraud
October 15, 2013
On April 10, 2013, the U.S. Securities and Exchange Commission (“SEC”) jointly with the Commodity Futures Trading Commission issued final rules and guidelines to require certain regulated entities to establish programs to address risks of identity theft. The compliance date, November 20, 2013, for the SEC’s Regulation S-ID: Identity Theft Red Flags Rule is quickly approaching and investment advisers meeting the definition under the new rules of a “financial institution” or a “creditor” that offer or maintain one or more “covered accounts” will need to make sure that they meeting the new regulatory requirements by the compliance date. (Click here to view our previous article on Regulation S-ID or click here to purchase our previously recorded webinar on this topic.) Many investment advisers may determine that Regulation S-ID does not apply to them, but this does not mean that these investment advisers do not need to have any policies and procedures relating to identity theft and protecting the clients’ assets.
