Key Considerations Now That Your Firm Has Transitioned from State to SEC Registration

Firm growth is always exciting, but what does this change mean for your firm's compliance program?

In general, many states model their statutes and regulations on the Investment Advisers Act of 1940 and the SEC rules thereunder. This helps to create some consistency; however, there are some of the rules and requirements that may change when an RIA firm transitions from state to SEC registration.

  • Financial Requirements: Some states have specific net capital (firm net worth) requirements for investment advisers who have discretion and/or custody of client funds or securities.
  • Individual Investment Adviser Representative ("IAR") Registration: The SEC does not register individual investment adviser representatives; however, states have rules in place for the registration of IARs of SEC-registered firms. Most states require an IAR of an SEC-registered firm to register in the state only if the IAR has a physical place of business in that state.
  • SEC EDGAR Filings: In addition to completing Form ADV Parts 1 and 2A for the investment advisory firm, there are other filings that may now be required dependent on a number of factors including the firm's regulatory assets under management ("AUM"). The filing that generates the most questions is by far the Form 13F for Institutional Investment Managers.  The Form 13F must be filed quarterly by the investment adviser within 45 days of the end of a calendar quarter on the SEC’s Electronic Data Gathering, Analysis, and Retrieval ("EDGAR") system.

In addition to the items listed above, the transition from state to SEC registration is an excellent time for the Chief Compliance Officer ("CCO") of an RIA firm to review the firm’s entire compliance program.

To learn more, download our RIA State to SEC Registration Transition Checklist.