The mine-run of mid-sized ($25 Million to $100 Million in Assets Under Management) SEC registered investment advisers will not be permitted to maintain SEC registration when Dodd-Frank is fully implemented. Rather they will be subject to state registration.
However, recent SEC interpretive guidance on mid-sized adviser registration provdes that a mid-sized adviser with its principal office and place of business in New York is not “subject to examination” by the state securities authority (the NY Attorney General's Office) and, accordingly, would continue to have to be registered with the SEC.
Apperently this position came about because in response to an SEC survey, regulators in Minnesota, New York and Wyoming did not advise the SEC staff that advisers registered with them are subject to examination; therefore, mid-sized advisers in these states were to continue to register with the SEC. Minnesota has since reported an examination requirement so New York and Wyoming remain the only states where mid-sized investment advisers will remain required to be SEC registered.
Based on recent figures, this will affect almost 300 mid-sized investment advisers in New York. The figures showed only 1 Wyoming mid-sized investment adviser.
I did get oral confirmation, from a spokesperson from the New York Attorney General's Office, that New York does not in fact have compliance examinations, at least regular ones, of its registered investment advisers. The individual I spoke to could not comment on whether this would change in the future.
It would seem the outlook in New York is cloudy but that for the time being mid-sized NY based investment advisers will be SEC registered and not NY registered.
Finally, even the use of the word "examination" is a little tricky. Many states including NY have examination requirements in the sense that indviduals affiliated with investment advisers need to have taken and passed qualifying examinations to demonstate competence to act as investment advisers. However, what the SEC is referring is an actual compliance "examinations" to ascertain that an investment adviser is operating in compliance with applicable laws and regulationg governing registered investment advisers.
* * *
Robert Kiggins, Esq. of McCarthy Fingar LLP, is author of the blog, and may be reached at (914) 385-1024 or rkiggins@mccarthyfingar.com.
Nothing is this blog is intended to be or may be relied upon as specific legal advice. Securities and related laws are complex and facts are different from case to case. Competent counsel should be consulted. Views expressed by the author in this article are his own and not those of any other person.
