Applicants starting an RIA firm and seeking registration under the Investment Advisers Act of 1940 must file a Form ADV via the Investment Advisor Registration Depository (“IARD”) with the SEC. FINRA administers the IARD but does not have jurisdiction over registered investment advisory firms unless and to the extent the advisory firm is also a registered broker-dealer. Once the Form ADV has been filed, the SEC must grant registration or decide registration should be denied within 45 days.  The following three segments list the primary (most popular) types of advisor registration. 

Generally speaking, investment advisors with $100 million or greater in regulatory assets under management (“RAUM”) must register with the SEC.  An SEC Advisor would submit Form ADV Parts 1 and 2A (the registered investment advisor “Brochure”) via the IARD. I can assist you with both parts. The Brochure must be drafted in a specific manner and pursuant to an SEC directive, must be drafted in plain English. Did the industry really need to be told to draft in a manner allowing people to understand what was written? Sadly, it did. Fortunately, I have attempted to draft all my clients’ documentation using the most direct language possible. Of course there are times where legal mumbo jumbo is necessary.

If an advisor does not meet the AUM threshold for SEC registration (see segment directly above), the advisor may have to register with one or more states instead of the SEC.  The State Advisor would submit Forms ADV Parts 1, 2A (Brochure) and 2B (“Supplemental Brochure”). Assets Under Management is the prime decider in whether an advisor is state or SEC registered. Counterintuitively, falling within a single compliance regime (SEC registration) is often preferable to your advisory firm finding itself subject to varying state advisory laws, rules and regulations.

However, there are other variables that may exist outside of the $100 million AUM threshold that would allow an advisor normally subject to state registration to fall within SEC jurisdiction (that is, registration). Contact me if you wish to discuss the variables and to what extent you may have a choice in the matter.  

To register as an Exempt Report Advisor (“ERA”), you may only provide advice to commingled pools with assets of less than $150 million, such as hedge funds or private equity funds.  If you provide advice to any separately managed accounts, you cannot rely upon this exemption.  The ERA would submit the Form ADV Part 1 only. 

ERAs are quite popular forms of registration these days as they dovetail smoothly into the funding needs of many start-up businesses seeking funding and many private placement broker-dealers have sought to become ERAs in order to earn ongoing advisory fees in addition to transaction based commissions for the actual sale of the fund interests to investors. I can form an ERA for you in addition to providing ongoing compliance support and internal documentation such as Written Supervisory Procedures (“WSPs”).