SEC Investment Adviser
Note: On the web pages below, references are made to the Rules as found in Title 10, Chapter 3, California Code of Regulations (“CCR”).
What is an SEC Investment Adviser?
The Securities and Exchange Commission (“SEC”) regulates investment adviser (“IA”) firms with more than $100 million in assets under management (and certain other investment adviser firms that meet other statutory criteria). See SEC Rule 203A-1 and SEC Rule 203A-2 and Dodd-Frank. Investment adviser firms regulated by the SEC must file required registration forms (“Form ADV”) to the SEC via the Investment Adviser Registration Depository (“IARD”). Any person registered with the SEC as an investment adviser and who conducts business in California for more than five clients should file a notice with the Commissioner of the Department of Financial Protection and Innovation (“Commissioner”). (See Corporations Code Section 25230.1)
How does a person make a notice filing?
A notice is to be filed with IARD on Form ADV in accordance with the form instructions and is to be filed within thirty (30) days of conducting business in California. The fee for filing a notice is $125. You should review the Information to Assist Persons Making a Notice Filing page. This page contains the instructions and additional information for making a notice filing.
Notice Filing Requirements [CCR § 260.230.1]
The notice expires December 31st unless renewed. The annual notice fee is $125 and is to be sent to IARD in accordance with its procedures. Detailed information concerning the renewal program may be found on the IARD web site at http://www.iard.com/renewals.asp. Generally, the Preliminary Renewal Statement is available online for retrieval and printing via IARD beginning early November. The IARD must receive full payment of the firm’s Preliminary Renewal Statement in early December. The notice will be considered renewed when the fee is received and accepted by IARD.
Amendments to Form ADV
Each year you must file an annual updating amendment to your Form ADV. This annual updating amendment should be filed with IARD within 90 days of your fiscal year end. You must also amend Form ADV (Parts 1 and 2) whenever the information in your Form ADV becomes inaccurate within 30 days after the change occurs.
It is important that Form ADV contains current and accurate information. It is especially important that the contact person’s e-mail address is current. We use this e-mail address to keep you informed of current issues and changes in laws and regulations.
Withdrawal of Notice
The notice may be withdrawn by completing Form ADV-W in accordance with the Instructions for Form ADV-W and filing with IARD.
What is an SEC Investment Adviser Representative?
An investment adviser representative (“IAR”), also referred to as a registered adviser (“RA”), is defined in Corporations Code Section 25009.5(b) as any person defined as an investment adviser representative by Rule 203A-3 of the Securities and Exchange Commission (“SEC”) and who has a place of business in California. An IAR is defined in SEC Rule 203A-3 as a supervised person of the investment adviser who has more than five clients who are natural persons (other than excepted persons) and more than ten percent of whose clients are natural persons (other than excepted persons).
A supervised person is not an investment adviser representative if the supervised person does not on a regular basis solicit, meet with, or otherwise communicate with clients of the investment adviser or provides only impersonal investment advice. (This is not a complete definition. See SEC Rule 203A-3 for the complete definition).
Place of business is also defined in SEC Rule 203A-3 as an office at which the IAR regularly provides investment advisory services, solicits, meets with, or otherwise communicates with clients and any other location that is held out to the general public as a location at which the IAR provides investment advisory services, solicits, meets with, or otherwise communicates with clients.
Qualification Requirements [CCR § 260.236]
Each IAR, except those employed or engaged by an investment adviser solely to offer or negotiate for the sale of investment adviser services, must qualify by passing the examination(s) as specified in CCR §260.236(a). The examination requirements are the Uniform Investment Adviser Law Examination (“Series 65”) passed on or after January 1, 2000 or the General Securities Representative Examination (“Series 7”) and Uniform Combined State Law Examination (“Series 66”). Effective October 1, 2018, FINRA has restructured Series 7 to be Series 7TO. Prior to taking S7TO, individuals must take and pass Securities Industry Essentials (SIE) exam. Waivers and exemptions to the examination requirements may be found in subsection (b) and (c) of CCR §260.236. Individuals holding in good standing an approved professional designation meet the exemption found in (c)(3) of CCR §260.236.
Individuals that must satisfy the qualification requirements set forth under CCR Section 260.236, and who are not registered in CRD, can enroll for the Series 65 examination via Test Enrollment Services System (TESS) with Financial Industry Regulatory Authority (“FINRA”).
Filing Requirements [CCR § 260.236.1(b)]
(1) Employment – Upon employment of an IAR, Form U-4 including any Disclosure Reporting Page(s), should be completed in accordance with the form instructions. The form is to be filed with, and the reporting fee paid to, CRD in accordance with its procedures. The filing of Form U-4 with CRD does not constitute an automatic approval of the filing by the Commissioner. The investment adviser should not consider an IAR “registration” approved until approved by the Commissioner and notification of the approval has been received through CRD.
(2) Changes – Within 30 days of any changes to Form U-4, an amendment to Form U-4 is to be filed. The amendment is to be filed directly with CRD in accordance with its procedures.
(3) Termination – Within 30 days of termination of an IAR, Form U-5 is to be filed in accordance with the form instructions. Form U-5 is to clearly state the reason(s) for termination. This form is to be filed directly with CRD in accordance with its procedures.
The filing fee for each IAR is $25. This fee is to be paid directly to CRD.
The 2014 annual renewal fee for an IAR is $25. Firms that have received assessment notices for 2014 may remit payments by:
- Sending an email to BDIA@dfpi.ca.gov agreeing to pay through FINRA’s Flex-Funding account and authorizing FINRA to remit the amount shown on the invoice. The firm must ensure that sufficient funds are available in the account as the Department is requiring a firm’s full payment from FINRA if this option is selected.
- Sending a check payable to:
Department of Financial Protection and Innovation
Attn: Accounting Department
2101 Arena Boulevard
Sacramento, CA 95834
Future annual renewals will be made through the annual renewal process administered by FINRA in December through Web CRD/IARD.
At this time there is no requirement to provide fingerprint cards.
Switching from State to SEC Registration
If a California-licensed investment adviser reports on its annual updating amendment assets under management of $100 million or more, they must register with the SEC within 90 days after the annual updating amendment is filed. Upon registration with the SEC, the California-licensed investment adviser should file Form ADV-W with IARD in accordance with instructions in Form ADV-W, and if applicable, make a notice filing.
Switching from SEC to State Registration
If an SEC investment adviser reports on its annual updating amendment assets under management of less than $100 million and is not otherwise eligible for SEC registration, they must withdraw from SEC registration within 180 days of their fiscal year end by filing Form ADV-W. Upon the filing of Form ADV-W withdrawing registration with the SEC, an investment adviser may not conduct business in California until a certificate has been secured from the Commissioner or unless the investment adviser is otherwise exempt. An investment adviser may file an application for a certificate in accordance with the instructions in CCR § 260.231 prior to the date the investment adviser’s registration with the SEC is subject to termination.