It is essential for all investment advisors registered or required to be registered with the U.S. Securities and Exchange Commission (“SEC”) under the Investment Advisers Act of 1940 (“Advisers Act”) to understand that it shall be unlawful under Rule 206(4)-7 of the Advisers Act to provide investment advice unless the investment advisor has adopted and implemented written policies and procedures reasonably designed to prevent violations of the Advisers Act and the rules thereunder. Rule 206(4)-7 also requires SEC registered investment advisors to review their policies and procedures no less than annually to ensure adequacy and effectiveness of the implementation of the written policies and procedures. It is important to note that while Rule 206(4)-7 does not apply to most investment advisors that are registered with state securities authorities, many states have adopted similar requirements regarding written policies and procedures; it is essential for all investment advisors to be aware of the compliance requirements of its state in order to prevent regulatory violations.
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The United States Securities and Exchange Commission (“SEC”) recently proposed a rule that would increase the dollar requirements that must be met before an investment adviser can charge performance based fees.
SEC May Delay “The Switch” to State Securities Regulators for Mid-Sized Investment Advisors
April 18, 2011
Under the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”), an investment adviser who has between $25 million and $100 million in assets under management will have to withdraw its registration with the U.S. Securities and Exchange Commission (“SEC”) and register with one or more state securities regulators pursuant to the applicable state laws. When the Dodd-Frank Act was enacted on July 21, 2010, the deadline for an investment adviser to switch its registration was July 21, 2011, the one year anniversary of the bill’s enactment. However, in a letter dated April 8, 2011, Robert Plaze, the associate director of the SEC’s Division of Investment Management, stated that the deadline for “the Switch” is likely to be extended until the first quarter of 2012. Click here to view the full letter.
YOUR INVESTMENT ADVISOR NEEDS TO UPDATE POLICIES & PROCEDURES DUE TO NEW FORM ADV PART 2
April 13, 2011
Now that your investment advisor has completed its new Form ADV Part 2, it’s time to update your investment advisor’s written policies and procedures to reflect the regulatory changes related to the Form ADV Part 2.
Electronic Delivery of New Form ADV Part 2
April 12, 2011
As your investment adviser firm is getting ready to deliver the new Form ADV Part 2 to its investment advisory clients, you may be considering electronic delivery as an option.
SEC Proposes Rule Which Would Exclude Family Office from Investment Adviser Registration
October 14, 2010
The United States Securities and Exchange Commission (“SEC”) has proposed to adopt Rule 202(a)(11)(G)-1 under the Investment Advisers Act of 1940 which would exempt a “family office” from registration under the Investment Advisers Act.
Washington Passes Legislation to Prevent the Financial Exploitation of a Vulnerable Adult
September 20, 2010
On June 10, 2010, the State of Washington passed new legislation designed to prevent the financial exploitation of vulnerable adults. The new legislation provides financial institutions the power to refuse to conduct a transaction if the institution suspects abuse and also requires employees of investment advisers and broker dealers to undergo abuse identification training. Section 20(16) of Chapter 74.34 of the Revised Code of Washington defines “vulnerable adult” as “a person:
Did you know that most state securities regulators require paid solicitors of investment advisor firms to license as investment advisor representatives? This means that the solicitor must either establish his/her own investment advisor firm or license under an existing investment advisor firm. From the solicitor’s perspective it is far easier to simply license under an existing investment advisor firm rather than forming a new investment advisor firm. However, what does that mean for the existing investment advisor firm holding the solicitor’s investment advisor representative license?
Kenneth Starr, an investment adviser representative, to several celebrities and other wealthy clients, was arrested on May 27th for allegedly using client funds for his own personal use. Starr has been charged in a New York District Court with fraud by an investment advisor, a wire fraud scheme to obtain property, money laundering, false statements in an IRS Filing, and false statements to a federal officer, for fraudulently misappropriating over $30 million of client funds. The Complaint also charges Andrew Stein, an associate of Starr’s, with various tax fraud violations. (Click here for the full Complaint).
SEC Rule 206(4)-7 under the Investment Advisers Act of 1940 (Investment Advisers Act) requires an investment adviser registered with U.S. Securities and Exchange Commission (“SEC”) to appoint an individual to serve as the Chief Compliance Officer (CCO). The CCO must be an individual who is competent and knowledgeable regarding the Investment Advisers Act, should be empowered with full responsibility and authority to develop and enforce appropriate policies and procedures for the investment adviser, and should have a sufficient position of seniority and authority within the organization to compel others to adhere to the investment adviser’s policies and procedures. It is important to note that if the firm is a state registered investment adviser, the primary compliance principal may not necessarily have the exact title of CCO as it may not be required by the applicable state securities regulations; however, if an individual is required to be appointed as the person responsible for supervision and compliance in Form ADV, Part 1B, Item 2A, this individual is acting in a capacity similar or equal to that of the CCO.
