When the Dodd-Frank Act was passed on July 21, 2010, the intent was to create a foundation for financial regulatory reform. With an aim toward improving accountability for the oversight of investment advisor firms, the Act assigned a greater level of oversight responsibility to state regulatory authorities. The Act created a new category for investment advisor firms having between $25 million and $100 million in assets under management. These advisors, labeled “mid-sized advisors,” shall be directly impacted by the Act’s initiative to transfer a significant portion of the oversight responsibilities for investment advisor firms from the SEC to state regulators.
On June 22, 2011, the SEC issued a release that explains how existing rules have been modified to facilitate the transition of oversight responsibilities from the SEC to state regulatory authorities for approximately 3,200 investment advisors. The release confirmed that, as prescribed by the Act, on July 21, 2011, the SEC’s assets under management threshold for registration increased from $25 million to $100 million. However, mid-sized advisors who were registered with the SEC as of July 21, 2011 must remain registered with the SEC until Jan. 1, 2012.
Furthermore, all advisors who are registered with the SEC as of Jan. 1, regardless of their annual amendment filing deadline, are required to file an amendment to their Form ADV Part 1A no later than March 31. The purpose of the amendment filing is to alert the SEC as to which advisors are no longer eligible for SEC registration. Those advisors who are no longer eligible have until June 28, 2012, to register with the appropriate state regulators and withdraw their SEC registration. The SEC intends to cancel the registration of advisors no longer eligible for SEC registration who fail to file an amendment or withdraw their registrations in accordance with the rule.