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Transitioning from SEC to State RegistrationTransitioning from SEC to State Registration
This material is designed for an investment professional audience, primarily Registered Investment Advisors (RIAs). TD Ameritrade Institutional, Division of TD Ameritrade, Inc., member FINRA/SIPC/NFA. TD Ameritrade is a trademark jointly owned by TD Ameritrade E IP Company, Inc. and The Toronto-Dominion Bank. © 2010 TD Ameritrade IP Company, Inc. All rights reserved. Used with permission.
October 21, 2010
Skip Schweiss, Managing Director of Advisor Advocacy,
TD AMERITRADE Institutional
Scott Eric Gottlieb, President,
U.S. Compliance Consultants, LLC
2
Disclosures
The following presentation is for general discussion purposes only and is not to be construed as legal advice for any person and/or firm. Some of the discussion points and answers to FAQs have been abbreviated, so you are encouraged to read the full version of SEC IA Release No. 3060 and consult with your attorney or regulatory consultant.
TD Ameritrade Institutional, U.S. Compliance Consultants and Stark & Stark are separate, unaffiliated and not responsible for services or policies.
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Introduction
Wall Street Reform Act
Impact on Advisers
Today’s Goals
State Registration Process
Q&A
Agenda
4
Introduction
36% of attendees to the first webcast in the “What Financial Regulatory Reform Means for You,” series responded that their firm’s AUM fell between $25 – $100 million*
Results from the August 2, 2010 webcast poll
Insert pie chart
5
Polling question
What is your firm’s AUM?
Below $25 million
Between $25 – $90 million
Between $90 - $110 million
Between $110 million - $500 million
Over $500 million
Scott Eric Gottlieb, President,U.S. Compliance Consultants, LLC
7
Introduction
Dodd-Frank Wall Street Reform and Consumer Protection Act
Spans over 2,300 pages
Affects almost every aspect of the U.S. Financial Services Industry
More on the way . . .
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Ends the “private investment adviser” exemption from SEC registration
Requires that most advisers to hedge funds register with the SEC
Changes the definition of “accredited investor”
Carves out “family offices” from the definition of investment adviser
Raising the threshold for registration with the SEC from $25 million in AUM to $100 million in AUM
Introduction
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Wall Street Reform Act - Raising the Threshold
Current Regulations
Below $25 million: Must register with one or more states
Between $25 million and $30 million: May register with either the SEC or one or more states
$30 million and Above: Must register with the SEC
New Regulations
Below $100 million: Must register with one or more states
$100 million and Above: Must register with the SEC
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Wall Street Reform Act - Exceptions
Multi-State Exemption
Nationally Recognized Statistical Rating Organization
Pension Consultant
Internet Investment Adviser
Newly Formed Adviser – 120 Day Exemption
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Impact on Advisers
4,200 SEC-Registered Investment Advisers
Must transition to registration with one or more states
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Impact on Advisers
SEC-Registered Advisers:
More Frequent Examinations
More Intense Examinations
Transitioning Advisers:
More Rigorous Registration Process
Unfamiliar Regulatory Environment
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Cause for Celebration!
Good-Bye Compliance Rule
Good-Bye Code of Ethics Rule
Good-Bye Proxy Voting Rule
Good-Bye Privacy Rule
14
Pause the Celebration
Hello Compliance Rule
Hello Code of Ethics Rule
Hello Proxy Voting Rule
Hello Privacy Rule
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Cause for Concern?
Unfamiliar State Rules
Minimum Capital Requirements
Financial Reporting
Custody/Bonding Requirements
More Stringent Rules
Identity Theft
Data Security
Anti-Money Laundering
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Today’s Goals
Understanding the Transition Process
Avoiding Common Mistakes
Providing you with Peace of Mind
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Important Transition Information
Must have an effective registration with at least one state
Only then can you withdraw from SEC registration
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Timing of the Registration Process
SEC Registration
Typically no longer than 45 days
Often much quicker
State Registration
Best case scenario – 45 to 60 days
Typical scenario – 60 to 90 days
Worst case scenario – Up to 6 months
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Polling question
Are you concerned about the states’ ability to handle the number of new registrations resulting from the transition?
Yes
No
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The Role of the State Regulator
Significant Involvement
Back and Forth
Multiple Requests for Additional Information
Respond Quickly
Courtesy and Respect
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Get an Early Start on the Registration Process
Determine in which state or states you must register
Visit the web sites of these states
www.nasaa.org/about_nasaa/2062.cfm
Checklists, Rules and Regulations
Documents filed via IARD
Documents filed directly with the State
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Where to Register
Any state where your advisory firm has a physical presence
Home Office
Branch Office
Location of Investment Adviser Representatives
Any state where you have noticed filed
De minimis rules
Multiple States = Multiple Registrations
23
Polling question
If you have to transition from SEC to state registration, how many states will you have to register in?
1 state
2 – 5 states
6 – 9 states
10 – 14 states
15 or more
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Primary Registration Documents
Form ADV Part 1A
Form ADV Part 1B
Form ADV Part 2
Form U-4
Advisory Agreements
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Supplemental Registration Documents
Financial Statements Corporate Formation Documents Affidavit of No Prior Investment Adviser Activity Designation of Supervisor Tax Certification Form Workers Compensation Coverage Affidavit Statement of Citizenship and Immigration Status Copies of all Marketing Material and Advertising Proof of E&O Coverage Surety Bond Form Fingerprint Cards Compliance Manual Code of Ethics Compliance Attestation
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What State Regulators Focus On
High Level of Scrutiny
All Required information – Pursuant to State Rules
Internally Consistent
Consistency Among Registration Documents
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Financial Statements and Net Worth Requirements
Financial Statements
Balance Sheet
Income Statement
Audited Statements or GAAP
Minimum Net Worth/Net Capital Requirements
Custody
Discretion (No Custody)
Prepayment
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Deregistering From the SEC
Form ADV – W
Status Section
Partial Withdrawal
Indicate Jurisdiction - SEC
Complete Items 1A through 1D
Do NOT complete Item 1E or Items 2 through 8
Q&A
30
Contact Information
Scott Eric Gottlieb, President,U.S. Compliance Consultants, LLC [email protected]