Registered Investment Advisers Archives - Page 3 of 16

Gifts and Gratuities

Posted on June 23, 2021 by admin

Advisory representatives are prohibited from accepting anything of value that might influence their investment decisions or serve to reward them in connection with their investment advisory activities. Additionally, advisory representatives are expected to refrain from knowingly conducting advisory business with any individuals or entities that use gifts, gratuities, or other items of value to bribe or influence others.

The provision and receipt of gifts and business entertainment by investment advisers and their employees are subject to pervasive regulation. Firms are to supervise and document all gifts and gratuities given to or received from any clients and prospective clients. The rule protects against the improprieties that may arise when firms or their associated persons gives gifts or gratuities. Firms must take any action to identify or examine the nature, frequency, extent and dollar amount to determine if such gifts and/or gratuities are in compliance with the firm’s policies. RIA’s are to adopt a policy governing professional conduct and conflicts of interest. Such policy is to provide that all associated persons have high standards of performance, integrity, productivity and professionalism. The firm should monitor for any and all conflicts of interest that could result, including instances of preferential treatment over other clients.

Schedule 13(d) and 13(g)

Posted on June 21, 2021 by admin

Sections 13(d) and 13(g) of the Securities Exchange Act of 1934 require certain market participants to file reports with the SEC. The reporting obligations under sections 13(d) and 13(g) generally focus on the concept of “beneficial ownership” and depend upon numerous factors, including the class and amount of securities acquired, and the purpose and intent with which the particular position is held. Generally, any person (including any entity) who is the “beneficial owner” of more than 5% of any class of equity securities, as defined in Rule 13d-1(i) of the Exchange Act, is subject to the beneficial ownership reporting requirements of section 13(d) of the Exchange Act.

Act 22: Puerto Rico Tax Incentives

Posted on June 16, 2021 by admin

In January of 2012, Puerto Rico passed legislation making it a tax haven for U.S. citizens that become residents of Puerto Rico. The tax laws, known as Act 20, the Export Services Act, and Act 22, the Individual Investors Act, shields new residents residing in Puerto Rico for at least half of the year from paying most federal income taxes. The U.S. Tax Code generously exempts Puerto Rico sourced income from federal tax and, under the law, residents pay minimal or possibly no taxes on interests and dividends, as well as capital gains. Additionally, property taxes are significantly lower than property taxes in the mainland U.S. Thus, making Puerto Rico a mecca for exportation of international services worldwide.

These tax laws were the response to Puerto Rico’s ballooning national debt that started accumulating when the US government cut federal subsidies to the island in 1996. Beginning in 2012, Puerto Rico used its special status within the United States to create unique tax incentives that would lure successful employers down to the island to bring capital and create jobs.

Once granted, the benefits under Act 22 will be secured during the entire term of the act, regardless of changes in the Puerto Rico tax laws applicable. The act shall have a term of 15 years, until December 31, 2030, and renewable for 15 years.

Assessing Custody for Registered Investment Advisers

Posted on June 7, 2021 by admin

One of the most critical rules under the Investment Advisers Act of 1940 (“Advisers Act”) is the custody rule, which is designed to protect advisory clients from the misuse or misappropriation of their funds and securities. With an adequate custody assessment, your firm should be able to recognize whether it has “custody” as defined under the custody rule and has appropriate controls to comply with the custody requirements. Your firm should also build appropriate controls and procedures to ensure future compliance with the custody rule, as applicable to the firm.

Material Changes to Form ADV

Posted on June 3, 2021 by admin

An investment adviser must promptly update its brochure if the information contained in it becomes materially inaccurate. This updated brochure is referred to as an “interim amendment”. Upon updating the brochure to reflect material changes, the investment adviser should begin delivering the interim amendment to its prospective clients before or at the time it advisory contract with such clients. For some material changes, the investment adviser will be further obligated to promptly deliver the interim amendment to its existing clients.

Electronic Storage for Investment Advisers

Posted on June 1, 2021 by admin

SEC Rule 204-2 require that firms make and keep required books and records for prescribed periods, and furnish copies of such records as necessary. Examples of such records include, but are not limited to electronic communication, advertisements, trade blotters, asset and liability ledgers, income ledgers, customer account ledgers, securities records, order tickets, trade confirmations, trial balances, and communications that relate to the firm’s business. Any records that are considered to be “original records” are required to be archived appropriately. Firms that elect to use electronic storage to maintain such records may only do so if they establish policies and procedures to:

Safeguard the records from loss, alteration, or destruction;
Limit access to the records to authorized personnel and regulators; and
Ensure that electronic copies of non-electronic originals are complete, true, and legible.