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Regulation and Compliance > Federal Regulation > SEC

Dodd-Frank: SEC Posts Advisor Size Regs

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WASHINGTON BUREAU — The U.S. Securities and Exchange Commission (SEC) has proposed a regulation that would increase the size of investment advisors to be regulated by the agency to $100 million, from $25 million.

The proposed investment advisor regulations would implement investor protection provisions Dodd-Frank compassof the new Dodd Frank Wall Street Reform and Consumer Protection Act.

Comments will be due 45 days after the rule appears in the Federal Register.

In addition to change the size of advisors that fall under the jurisdiction of the SEC, the proposed regulations would require advisors to hedge funds and other private funds to register with the SEC; define “venture capital fund”; and change the rules governing some investment advisor registration exemptions.

The SEC also proposed amendments to rules that would require disclosure of greater information by investment advisors and the private funds they manage, as well as amendments that would revise the SEC’s pay-to-play rule.

SEC-regulated advisors would have to give the SEC more information about the types of investment products about which they give advice, “such as various types of swaps and variable life insurance,” officials say.

An advisor also would have to tell the SEC more about the types of clients it advises, such as whether it advises insurers, pension fund funds or

retirement plans.

The 181-page proposed rule would subject 4,100 of the 11,850 advisors now registered with the SEC to state oversight, officials say.

These advisors will continue to be subject to the federal Advisers Act’s general anti-fraud provisions, officials say.

The proposed regulations would change a rule that has existed since 1996, when regulatory oversight for investment advisors was divided between the SEC and the states, primarily based on the amount of money an advisor manages for its clients.

Under existing law, advisors generally may not register with the SEC unless they manage at least $25 million for their clients.

The bill raises the threshold for SEC regulation to $100 million by creating a new category of advisors called “mid-sized” advisors.

A mid-sized advisor, which generally may not register with the SEC and will be subject to state registration, is defined as an advisor that:

- Manages between $25 million and $100 million for its clients.

- Is required to be registered in the state where it maintains its principal office and place of business.

- Would be subject to examination by that state, if required to register.


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