SEC Advisers  with Assets Under $100 Million Must Become State Registered.

Title IV of the Dodd-Frank Act includes many of the amendments to the Investment Advisers Act implemented by the Dodd-Frank Act.  These provisions will require a significant number of advisers currently registered with the SEC to withdraw their registrations with the SEC and to switch to registration with one or more state securities authorities. Compliance Advisers can assist new and existing advisers by managing the state application processes as well as with notice filings for SEC-registered advisers.

Section 410 of the Dodd-Frank Act creates a new group of “mid-sized advisers” and shifts primary responsibility for their regulatory oversight to the state securities authorities. It does this by prohibiting from registering with the SEC an investment adviser that is registered as an investment adviser in the state in which it maintains its principal office and place of business and that has assets under management between $25 million and $100 million.   *Unlike a small adviser, a mid-sized adviser is not prohibited from registering with the SEC:

• if the adviser is not required to be registered as an investment adviser with the securities commissioner (or any agency or office performing like functions) of the state in which it maintains its principal office and place of business;
• if registered, the adviser would not be subject to examination as an investment adviser by that securities commissioner; or
• if the adviser is required to register in 15 or more states.

Transitioning to State Registration – COMPLIANCE ADVISERS CAN HELP!

The SEC is proposing a new rule, rule 203A-5, which would require each investment adviser registered with the SEC on July 21, 2011 to file an amendment to its Form ADV no later than August 20, 2011, 30 days after the July 21, 2011 effective date of the amendments to section 203A, and to report the market value of its assets under management determined within 30 days of the filing.   This filing would be the first step by which an adviser no longer eligible for SEC registration would transition to state registration.  It would require each investment adviser to determine whether it meets the revised eligibility criteria for SEC registration, and would provide the SEC and the state regulatory authorities with information necessary to identify those advisers required to transition to state registration and to understand the reason for the transition or basis for continued SEC registration.   An adviser no longer eligible for SEC registration would have to withdraw its SEC registration by filing Form ADV-W no later than October 19, 2011 (60 days after the required refiling of Form ADV).

Compliance Advisers can assist new and existing advisers by managing the state application/transition processes as well as with notice filings for SEC-registered advisers.

IMPORTANT: The SEC expects to cancel the registration of advisers that fail to file an amendment or withdraw their registrations in accordance with the rule.

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