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Transitioning from SEC to State Registration This material is designed for an investment professional audience, primarily Registered Investment Advisors.

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Presentation on theme: "Transitioning from SEC to State Registration This material is designed for an investment professional audience, primarily Registered Investment Advisors."— Presentation transcript:

1 Transitioning 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 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.

3 3 Introduction Wall Street Reform Act Impact on Advisers Todays Goals State Registration Process Q&A Agenda

4 4 Introduction 36% of attendees to the first webcast in the What Financial Regulatory Reform Means for You, series responded that their firms AUM fell between $25 – $100 million* Results from the August 2, 2010 webcast poll Insert pie chart

5 5 Polling question What is your firms AUM? Below $25 million Between $25 – $90 million Between $90 - $110 million Between $110 million - $500 million Over $500 million

6 Scott Eric Gottlieb, President, U.S. Compliance Consultants, LLC

7 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...

8 8 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

9 9 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

10 10 Wall Street Reform Act - Exceptions Multi-State Exemption Nationally Recognized Statistical Rating Organization Pension Consultant Internet Investment Adviser Newly Formed Adviser – 120 Day Exemption

11 11 Impact on Advisers 4,200 SEC-Registered Investment Advisers Must transition to registration with one or more states

12 12 Impact on Advisers SEC-Registered Advisers: More Frequent Examinations More Intense Examinations Transitioning Advisers: More Rigorous Registration Process Unfamiliar Regulatory Environment

13 13 Cause for Celebration! Good-Bye Compliance Rule Good-Bye Code of Ethics Rule Good-Bye Proxy Voting Rule Good-Bye Privacy Rule

14 14 Pause the Celebration Hello Compliance Rule Hello Code of Ethics Rule Hello Proxy Voting Rule Hello Privacy Rule

15 15 Cause for Concern? Unfamiliar State Rules Minimum Capital Requirements Financial Reporting Custody/Bonding Requirements More Stringent Rules Identity Theft Data Security Anti-Money Laundering

16 16 Todays Goals Understanding the Transition Process Avoiding Common Mistakes Providing you with Peace of Mind

17 17 Important Transition Information Must have an effective registration with at least one state Only then can you withdraw from SEC registration

18 18 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

19 19 Polling question Are you concerned about the states ability to handle the number of new registrations resulting from the transition? Yes No

20 20 The Role of the State Regulator Significant Involvement Back and Forth Multiple Requests for Additional Information Respond Quickly Courtesy and Respect

21 21 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

22 22 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 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

24 24 Primary Registration Documents Form ADV Part 1A Form ADV Part 1B Form ADV Part 2 Form U-4 Advisory Agreements

25 25 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

26 26 What State Regulators Focus On High Level of Scrutiny All Required information – Pursuant to State Rules Internally Consistent Consistency Among Registration Documents

27 27 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

28 28 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

29 Q&A

30 30 Contact Information Scott Eric Gottlieb, President, U.S. Compliance Consultants, LLC 888-798-2930 seg@uscomplianceconsultants.com


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