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State Investment Adviser Registration: Navigating Unique State Requirements September 9, 2012.

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Presentation on theme: "State Investment Adviser Registration: Navigating Unique State Requirements September 9, 2012."— Presentation transcript:

1 State Investment Adviser Registration: Navigating Unique State Requirements September 9, 2012

2 Today’s Presentation Overview I.State Registration Requirements II.Additional Required State Registration Documentation III.Minimum Net Worth Requirements & Performance Fees IV.Brochures 2A and 2B V.Common Deficiencies and Tips for Smooth Registration VI.Annual Reporting Requirements VII.State Examination and Audits VIII.For More Information

3 An Introduction Today’s Speaker Noula Zaharis, IACCP Noula Zaharis serves as the compliance specialist and director of compliance services for Investment Law Group in Atlanta, Georgia. Noula is a certified paralegal with an extensive history in securities regulatory compliance matters focused on audits, examinations, and fraud investigations. She brings her significant experience in working with Federal and state regulatory agencies to assist investment advisers in all areas of registration and compliance. She has experience handling the registration process in thirty-five states. Noula holds a B.A. in English from Furman University and a M.A. from Emory University. She received her paralegal certification from Emory University. Prior to becoming a paralegal, Noula was an English and Latin teacher with Atlanta Public Schools and Georgia State University. Noula is an Investment Adviser Certified Compliance Professional (IACCP).

4 State Registration Requirements State Registration  States conduct a thorough review of investment adviser registration applications  Form ADV, Brochure Supplements, and Wrap Brochure  States have specific document requirements for advisers seeking registration in their jurisdictions  A registration application file is deemed complete and ready for review once all required documents are received  States have specific disclosure requirements for advisors offering advisory services in their jurisdictions

5 Additional Required Registration Documentation For Investment Advisers Advisory Activities Statement / Affidavit  Alabama  Arizona  District of Columbia  Florida  Hawaii  Illinois  Maryland  Missouri  Nebraska  New Mexico  Oregon  Pennsylvania  Rhode Island  Texas  Vermont  Virginia Branch Office Disclosure  Alabama  Arizona  Florida  Illinois  Maine (Form BR)  New Hampshire  New Mexico  Ohio  Vermont

6 Additional Required Registration Documentation For Investment Advisers Entity Formation / Foreign Entity Qualification  Alabama  California  Illinois  Minnesota  Missouri  Mississippi  Nebraska  New Hampshire  Tennessee  Texas  Washington  West Virginia EIN / Tax Verification  Florida  Texas  Vermont  Wisconsin

7 Additional Required Registration Documentation For Investment Advisers Qualifying Principal / IAR Disclosure  Alaska  Colorado  Delaware  District of Columbia  Florida  Idaho  Illinois  Kansas  Kentucky  Massachusetts  Michigan  Nebraska  Nevada  New Mexico  New York  Oregon  Pennsylvania  Rhode Island  Tennessee  Virginia  Washington  Wisconsin Fingerprints and Background Check  Arizona  Delaware  District of Columbia  Florida  Georgia  Indiana  Kentucky  Maine  Rhode Island  South Carolina  Washington  West Virginia

8 Additional Required Registration Documentation for Investment Advisers Compliance Manual, DRP Code of Ethics  Kansas  Ohio  Rhode Island  South Carolina  Vermont  Virginia Privacy Notice  Arizona  Delaware  District of Columbia  Florida  Georgia  Hawaii  Indiana  Kentucky  Maine  Rhode Island  South Carolina  Washington  West Virginia

9 Additional Required Registration Documentation For Investment Advisers Advertising Literature and Promotional Material  Connecticut  Nebraska  Nevada  New Jersey  Tennessee  Virginia Books and Records Location Statement  California  Illinois  Indiana  Florida

10 Additional Required Registration Documentation For Investment Advisers “Unique” Required Documentation  Qualified Custodian Contract (Kansas)  Affidavit for Form ADV Schedule A Owners / Filing Paper Form U4s (Massachusetts)  DBA Disclosure Forms (Connecticut)  IA Supplement Application Form (Michigan)  Designation of CCO on Form ADV (Missouri, Tennessee)  List of Employees and Duties  US Citizenship Attestation Form (Nebraska)  Child Support Good Standing Form (Nevada)  Clean Hands Form (District of Columbia)  Proof of Firm Location (Nevada)  Recordkeeping and Record Retention Affirmation Statement / Compliance With Home State Rule (Florida, New Jersey, Ohio, Vermont)  Solicitors Agreements / Letter of Undertaking (Pennsylvania)  Suitability Form (Washington)

11 Minimum Net Worth Requirements Net Worth Requirements  Alabama  Arkansas  California  Delaware  District of Columbia  Florida  Hawaii  Idaho  Iowa  Kansas  Maine  Maryland  Massachusetts  Minnesota  Mississippi  Missouri  Montana  Nebraska  Nevada  New Hampshire  New Jersey  New Mexico  North Carolina  Pennsylvania  Rhode Island  South Carolina  Tennessee  Utah  Vermont  Virginia  Washington  West Virginia  Wisconsin Surety Bond  Alabama*  Alaska*  Arkansas*  Delaware  District of Columbia  Hawaii*  Idaho*  Iowa  Kansas  Kentucky  Maine  Maryland  Massachusetts*  Minnesota  Mississippi*  Montana  Nebraska*  New Jersey  New Mexico*  North Carolina  Pennsylvania  Rhode Island  South Carolina*  Utah*  Vermont*  Virginia*  Washington*  West Virginia * State-specific bond form required

12 Performance-based Fees State-specific Performance Fee Rules  California  District Of Columbia  Kentucky  Maryland  North Carolina  Ohio  Oregon  Utah  Vermont  Washington  Wisconsin Permitted via Relief Request Only  Alabama*  Maine  West Virginia* * Performance-based fees not allowed by rule but may be allowed by request

13 Brochures 2A and 2B Watch Out for Unique Deficiencies  Cover Pages – “Registered as Investment Adviser”  Cover Pages – Do not permit “registered” instead use “licensed with”  Mismatched info between Brochure 2A, Advisory Agreement, and other submitted documentation  Do not use acronym RIA or IAR – deemed misleading  Item 5: Fees – details of how calculated  Item 5: “Fees not negotiable” language not allowed by some  Item 6 – Performance fee state-specific language  Item 10: Risk factors must be specific to advisory business  Item 14: Required specific language if compensating for client referrals

14 Brochures 2A and 2B  Item 15, Reporting: Must use specific language regarding delivery of reports to clients  Item 15 Custody: State-specific Language  Item 15 Custody: Some do not permit the use of “indirect” custody  Item 15 Review of Account: Don’t use “continual basis review”  Item 17: Proxy Voting – Some states require a proxy policy because they take position that it is fiduciary duty to vote proxies  Must include disclosure regarding compliance with GLBA  Names on Brochure Supplement have to appear exactly as appear on U4  If grouped supplement, each IA rep. must have own cover page Watch Out for Unique Deficiencies

15 Watch Out for Common Deficiencies  Mismatched info between Brochure 2A and Advisory Agreement  Failure to provide all required documentation  Improper material on websites – your own or a third party’s Common Deficiencies and Tips for a Smooth Registration A Few Tips  Don’t wait to begin the registration process  Submit all required documentation at onset of registration  The regulator is your friend!  Consult with a firm with experience handling state registrations

16 Annual Reporting Requirements  Financial Reporting Filings  Branch Office Verifications  Investment Adviser Representative Verifications  State unique additional report questionnaires State-specific Annual Filings In addition to the annual update amendment filings, many states also require advisers to file annual reports directly with the state

17 State Examinations and Audits  Form ADV and Brochure  Suitability  Books and Records Rule  Complaint File  Compliance Manual  Written Advisory Agreements  Business Cards and Letterheads  Advertising and Performance Claims  Financial Statements  Custody Rule compliance State “Hot Button” Issues

18 For More Information Noula Zaharis Compliance Director +1 (404) (404)


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