More On Legal & Compliancefrom The Advisor's Professional Library
- Client Communication and Miscommunication RIA policies and procedures must specify what type of communications should be retained. The safest course of action is for RIAs to retain all communicationsto clients, from clients, and about client accounts. To comply with fiduciary obligations, communications must be thorough and not mislead.
- Client Commission Practices and Soft Dollars RIAs should always evaluate whether the products and services they receive from broker-dealers are appropriate. The SEC suggested that an RIAs failure to stay within the scope of the Section 28(e) safe harbor may violate the advisors fiduciary duty to clients, so RIAs must evaluate their soft dollar relationships on a regular basis to ensure they are disclosed properly and that they do not negatively impact the best execution of clients transactions.
The North American Securities Administrators Association (NASAA) announced that it had recently launched an online resource to assist financial advisors in making the switch from federal to state registration. The resource is located on the association's website and offers, as a convenience for advisors, information on individual state registration requirements.
Under Dodd-Frank, advisors with assets under management of between $25 million–$100 million must switch from federal registration to state, and must do so by June 28. Advisors who don’t need to switch from SEC registration had to notify the agency of their eligibility to stay with federal registration by March 30.
Jack E. Herstein, NASAA president and assistant director of the Nebraska Department of Banking and Finance Bureau of Securities, said of NASAA’s latest step to help advisors, “State securities regulators are pleased to provide this new resource, which is further evidence of our dedicated effort to assist advisers in making the switch from SEC to state registration.”
The online IA Registration Resource is available on the IA Switch Resource Center, located on the NASAA website. It contains data on individual state registration fees, financial and bonding requirements, requirements for sole proprietorships and branch offices, de minimis requirements and other required documents.
Herstein pointed out that the information contained on the website is intended as a convenience and not as legal advice, and said in a statement, “Investment advisers and their counsel should consult the laws and rules in each state in which they are registering to verify the accuracy of the information.”
Another action taken by NASAA to help advisors making the switch is a one-month deadline extension to April 30 for its coordinated review initiative. The Investment Adviser Coordinated Review Program is offered for advisors who must switch their SEC registration to multiple states; those who must register with between 4 and 14 states can participate in the program. Dodd-Frank allows advisors registered in 15 or more states to remain with the SEC.
Eligible investment advisors must complete and submit the Coordinated Review Form found in the IA Switch Resource Center on the NASAA website in addition to filing all materials required by the states in which the adviser is applying for registration. There is no additional cost to use the program.