Close Close

Regulation and Compliance > State Regulation

New Investment Adviser Rules Could Increase Third-

Your article was successfully shared with the contacts you provided.

NEW YORK (–Responses to rules for investment advisers recently proposed by the U.S. Securities and Exchange Commission suggest that outside marketers are likely to be subject to compliance requirements, as well.

In a letter to the SEC dated April 18, the North American Securities Administrators Association recommended that proposed securities law compliance rules be extended to “finders” or “solicitors,” people who don’t work for an investment adviser but who solicit clients for it.

Solicitors are covered already by the Advisers Act, under a rule that makes the adviser responsible for ensuring the marketer is not statutorily disqualified, that there is a written marketing agreement and that both adviser and marketer disclose the arrangement to clients. The SEC proposals would add compliance requirements.

Under proposed regulation, registered investment advisers have to adopt and implement policies and procedures designed to prevent violation of securities laws as well as appoint a chief compliance officer Previous HedgeWorld Story. NASAA supports the proposal and wants state officials to adopt similar rules so that regulation will be uniform across states.

The letter suggests addressing marketing relationships and making them subject to the same compliance procedures. “It is logical that the compliance rules should extend to solicitors, inasmuch as the solicitation rule already requires similar oversight,” it states.

NASAA also commented on other aspects of the proposed compliance requirements, arguing against one-size-fits-all rules and emphasizing the need for a flexible approach.

The organization prefers not to have any exception for small advisers, proposing that the Commission instead indicate more extensive safeguards for advisers with larger assets under management and a greater numbers of clients. In the past, the SEC had trouble inspecting large numbers of small advisers and left their regulation to state agencies.

There are currently 7,790 registered advisers. The SEC examines each of them once every five years, and the examinations focus largely on compliance programs, according to NASAA.

While many hedge funds currently are not registered with the SEC, an ongoing investigation into the industry is expected to result in new regulation making all managers register as investment advisers, which means they will be subject to these proposed rules. Some advisers favor a registration requirement as added protection for investors Previous HedgeWorld Story.

[email protected]