Wyoming to Begin Registering RIAs

New Uniform Securities Act also addresses crowdfunding

As of July 1, 2017, some Wyoming RIAs registered with the Securities and Exchange Commission will switch to state regulation.

Wyoming was the last holdout of states that didn’t require advisors to register with state regulators. The Wyoming Uniform Securities Act will change that.

The new Securities Act “significantly modifies and updates” the state’s current securities law, according to a statement from the Wyoming secretary of state’s office. It passed the state House with a single “nay” vote, and was voted through the Senate unanimously. It was signed into law in March.

“This rewrite of the Securities Act has been decades in the making. The current Act is over 50 years old and did not reflect many of the realities of current practice, and ignored some of the most exciting possibilities of modern financing such as crowdfunding,” Wyoming Secretary of State Ed Murray said in a statement.

Under the 2010 Dodd-Frank Act, advisors with less than $25 million in assets under management are prohibited from registering with the SEC if their principal office is located in a state that regulates advisors – meaning any state other than Wyoming.

That gave some advisors a way to avoid SEC registration by listing Wyoming as their principal place of business.

The SEC has been cracking down on such chicanery. In February 2015, it busted three firms and their owners for listing cities in Wyoming as their home office locations, despite doing business from New Mexico, Colorado and California.

More recently, the agency launched an investigation against Bantry Bay Capital and its CEO and owner Timothy Sexton for failing to produce required books and records. When examiners visited the Jackson, Wyoming office listed on Sexton’s Form ADV, they found a UPS office instead, according to the SEC’s litigation release. Instead of responding to requests for books and records, he withdrew his SEC registration.  

The SEC’s Denver office filed another subpoena against Sexton in May, to which he did not respond. The agency is continuing its investigation, and as of July 1, “has not concluded that any individual or entity has violated the federal securities laws.”

The new act also paves the way for Wyoming-based entrepreneurs to raise up to $2 million through crowdfunding. “We are now embracing a new and innovative way to provide capital financing to Wyoming’s entrepreneurs and small businesses through crowdfunding provisions included in this rewritten Securities Act,” Murray said.

The federal Fix Crowdfunding Act passed the House on July 5 with a resounding 394-4 vote. That bill did not raise the cap on crowdfunded capital to $5 million as proponents wanted, but increased the amount companies must raise before they have to register with the SEC to $75 million for those with reported revenues and $50 million for those that don’t yet have revenues, Washington Bureau Chief Melanie Waddell reported.

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