RIA Compliance Blog
Two Parker MacIntyre attorneys — Bob Terry and Steve Parker — attended forums held this week by the Investment Adviser Section of the North American Securities Administrators Association, and by the NASAA members of the Joint NASAA/FINRA CRD/IARD Steering Committee, at the NASAA Annual Conference in Wichita, Kansas. The forums’ panelists included Melanie Senter Lubin, Securities Administrator for the State of Maryland, NASAA General Counsel Joseph Brady, Michigan Securities Director Linda Cena, and other Section and Committee members. Bob Terry, Counsel to Parker MacIntyre, served as Vice Chair of the CRD/IARD Committee for over three years until he left the office of the Georgia Secretary of State in January of 2011.
The hottest topics of both forums were details relating to transitioning to state registration of mid-sized advisers, as required by the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank’) and implementing regulations.
At least 20 states to date have conducted training seminars to investment advisers seeking information about switching to state registration and what to expect from becoming state-registered. NASAA has provided training materials and logistical support to securities administrators in those states. The goal is to introduce the prospective registrants to state-specific issues that may affect their registration process or their ongoing operations, particularly in the areas of regulation that may differ slightly or even significantly from the SEC rule or practice that the adviser to which the adviser is accustomed.
In addition, in an attempt to bring uniformity in the switch process in each state, NASAA has provided its members, the state regulators, “tool kits” with basic information, deadlines, recommendations, and similar information designed to ease the burden of the state to the new and unusual process.
As most advisers know, under the newly-adopted SEC Rule , most mid-sized advisers must remain SEC registered until the first quarter of 2012, but then must complete their switch to state regulation and withdrawal from SEC registration by June 28 of the same year. The switch to state registration requires a careful “dance” suggested by the state regulators as follows:
Step One: Commence state registration through filing an other than annual updating amendment on or after November 7, 2011 (the date on which certain Form ADV amendments take effect), but remain pending until after the beginning of 2012. (This may require coordination with state examiners to insure that the switch does not become effective prematurely.)
Step Two: As early as possible in the first quarter of 2012, complete the state registration process and become effective in the state or states in which the adviser is registering.
Step Three: Before June 28, 2012, file a PARTIAL Form ADV-W withdrawing SEC registration only. It is important to remember to file the annual updating amendment within 90 days of the end of the fiscal year (for most firms, by March 31, 2012).
The NASAA panelists stressed that beginning the process early is advisable in order to allow time to resolve any concerns state regulators may have. In essence, RIA’s should view this as a new registration process – with all of the possible complications that may entail. The panelists also noted that state regulators have been working for months to educate themselves about the process in an effort to make the transition for RIA’s as smooth as possible, while still fulfilling their regulatory responsibilities.
For investment advisers intending to register in four or more states, NASAA is providing a coordinated review process designed to eliminate duplicative or inconsistent notices of deficiencies or requests for additional information. This will be accomplished by administrators from each of the states involved working in concert, through approved NASAA guidelines, to communicate with the applicant regarding the application process. In many instances, this process is expected to expose or highlight for the firm differing state by state requirements.
Along those lines, the NASAA Investment Adviser Section has begun the process of surveying the states in order to better define the state-by-state differences. The ultimate objective of this survey is to make the regulations and practices more uniform, in order to ease the administrative burdens of those seeking to apply in multiple jurisdictions.
Parker MacIntyre attorneys have extensive experience in the area of state investment adviser regulation and compliance. Please feel free to contact our firm if you are a mid-sized adviser in need of assistance with the switch process or any other area of regulation.