William Galvin: The 2013 IA 25 Extended Profile

This is William Galvin’s first appearance on the IA 25. Click here to view the complete list and Special Report schedule for extended profiles for each of the 2013 IA 25 honorees.

Since taking on an additional 139 advisors with $6.6 billion in assets under the Dodd-Frank “switch,” Massachusetts has “been able to do what the Securities and Exchange Commission hasn’t”—adequate examinations of those advisors, said William Galvin, Secretary of the Commonwealth of Massachusetts and its securities regulator.

Since last June, when advisors with assets of between $25 million and $100 million under management were required to switch from federal to state jurisdiction, Massachusetts has already examined 40% of the new firms under its purview, Galvin said, and has already “gotten a better feel for the nature of their businesses.”

For instance, while about 15% of the new advisors custody assets, Galvin said, Massachusetts examiners found that some advisors “were not reporting having custody of client assets over which they serve as a trustee or executor,” which under Massachusetts law must be included in total assets under management. When advisors are trustees they have a “different level of authority,” and “can move funds out of [a client’s] account,” setting up a “different relationship” with the client, he said.

Indeed, with a total of 929 advisors under its belt—720 of which say Massachusetts is their primary place of business—Galvin said Massachusetts has “repositioned” exam personnel to be more efficient and to help create economies of scale when it comes to examining advisors.

While still in the early stages of taking on the added advisors, Galvin said the state hasn’t noticed any “inherently evil” practices from those advisors. “We don’t want to be burdensome” on these advisory firms, he said, most of which are small businesses. In fact, he said, “it’s the people who aren’t registered” that present the biggest problems for the state.