The Importance of a Chinese Wall in Multi-Service Securities Firms

Multi-service securities firms have a high risk of insider trading as information can seep through to other departments.  The antifraud provisions of the federal securities laws restricts all persons from trading based on material non-public information.  Therefore, multi-service securities firms such as those that offer investment banking, corporate counseling, and retail broker-dealer services must take the necessary steps to prevent the interdepartmental flows of material non-public information about corporate clients.  To prevent such occurrences, it is required that firms build an internal Chinese Wall. Read More…

How to Become an RIA

A registered investment advisor (“RIA”) is a person or firm that, for compensation, provides advice, makes recommendations, issues reports or furnishes analyses on securities, either directly or through publications.  Typically, an RIA manages the assets of high net worth individuals and institutional investors.  RIAs have the highest standard of care as they are deemed fiduciaries.  As a fiduciary, RIAs owe their clients a duty of Read More…

Annual Reviews – SEC Rule 206(4)-7

SEC Rule 206(4)-7 requires investment advisers to review, no less frequently than annually, the adequacy of its written compliance policies and procedures and the effectiveness of their implementation. The SEC expects annual reviews to take into consideration any compliance matters that arose during the previous year, any changes in the business activities of the adviser or its affiliates, and any changes in the Investment Advisers Act or related rules that may impact the adviser’s policies and procedures. In addition, the SEC expects that an investment adviser will review its compliance policies and procedures on an interim basis in response to significant compliance issues, changes in business activities, and new regulation.  Read More…

Wrap Fee Suitability

A wrap fee program is an arrangement between financial institutions (typically broker-dealers and investment advisers) that enables customers to pay an all-inclusive fee (usually as a percentage of assets) for investment advisory services bundled with various other services, such as execution, clearing, and custodial services. Wrap fee programs create a number of suitability issues for the financial institutions that sponsor the wrap fee program or participate in the program.  Read More…

Investment Advisers: SEC vs. State Registration

Due to the Dodd-Frank legislation, as of mid-2012, there are rules for registration eligibility that are primarily determined by a firm’s assets under management (“AUM”). For all firms below $100 million AUM, registration is required with the appropriate state jurisdictions.  For firms above $100 million AUM, registration will be at the SEC level, unless a registration exemption exists. In order to account for fluctuations in AUM, the SEC has imposed, by rule, a buffer for Investment Advisers with AUM between $90 million and $110 million. An adviser may register with the SEC once it reaches AUM of $100 million. An adviser must register with the SEC if it’s AUM is $110 million or more at the time they file their annual ADV amendment. Once registered with the SEC, a mid-size adviser can remain registered with the SEC as long as its AUM is at least $90 million at the time they file their ADV amendment.  Read More…

SEC Releases New RIA Form ADV Filing Requirements Effective October 2017

Securities and Exchange Commission (SEC) adopted amendments to Investment Advisers Act rules in August 2016 that will result in significant changes to Form ADV for advisory firms working with SMA’s (Separately Managed Accounts).  The additional data will help the SEC focus on examining firms more often that present the greatest risks. Read More…

Exempt Reporting Adviser Registration – Part II

[Continued from Exempt Reporting Adviser Registration – Part I]

Requirements for Exempt Reporting Advisers:

Exempt Reporting Advisers (“ERAs“) must submit to the SEC, and periodically update, a truncated version of the Form ADV.  More specifically, ERAs must complete the following items of Part 1A of Form ADV:

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Exempt Reporting Adviser Registration – Part I

The Dodd-Frank Act (“Dodd-Frank”) not only mandated the registration of countless investment advisers, but also introduced a new classification of advisory firm – the Exempt Reporting Adviser – that is exempt from registration under the Investment Advisers Act of 1940 (the “Advisers Act”). Exempt Reporting Advisers (“ERAs“) are investment advisers that are not required to register as an adviser with the SEC or state regulators, due to their status as an advisor to either: (i) private funds and having less than $150 million of assets under management; or (ii) qualifying venture capital funds.

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Upcoming Changes to Form ADV Part 1

The Securities and Exchange Commission (SEC) recently announced revisions to the ADV Part 1.  These changes will affect most Registered Investment Advisers (RIAs) when they complete their annual amendment; however, RIAs may be prompted to address additional questions if a firm submits an amendment on or after October 1st.

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What Is Form U10 And Why Do I Need It?

If you’re seeking FINRA registration, you must be employed by or associated with a FINRA member firm. If you are required to take a FINRA examination while associated with a FINRA member firm – or a firm applying for FINRA membership – all examination scheduling should happen via Form U4. But what if you’re not employed by or associated with a member firm, but another regulatory authority has required that you qualify by examination? In such a case, instead of filing Form U4, you must file form U10.

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