Transcript Slide 1

State Investment Adviser Registration:
Navigating Unique State Requirements
September 9, 2012
Today’s Presentation
Overview
I.
State Registration Requirements
II.
Additional Required State Registration Documentation
III. Minimum Net Worth Requirements & Performance Fees
IV. Brochures 2A and 2B
V. Common Deficiencies and Tips for Smooth Registration
VI. Annual Reporting Requirements
VII. State Examination and Audits
VIII.For More Information
An Introduction Today’s Speaker
Noula Zaharis, IACCP
Noula Zaharis serves as the compliance specialist and director of
compliance services for Investment Law Group in Atlanta, Georgia. Noula is
a certified paralegal with an extensive history in securities regulatory
compliance matters focused on audits, examinations, and fraud
investigations. She brings her significant experience in working with Federal
and state regulatory agencies to assist investment advisers in all areas of
registration and compliance. She has experience handling the registration
process in thirty-five states. Noula holds a B.A. in English from Furman
University and a M.A. from Emory University. She received her paralegal
certification from Emory University. Prior to becoming a paralegal, Noula
was an English and Latin teacher with Atlanta Public Schools and Georgia
State University. Noula is an Investment Adviser Certified Compliance
Professional (IACCP).
State Registration Requirements
State Registration
 States conduct a thorough review of investment adviser
registration applications
 Form ADV, Brochure Supplements, and Wrap Brochure
 States have specific document requirements for advisers
seeking registration in their jurisdictions
 A registration application file is deemed complete and ready
for review once all required documents are received
 States have specific disclosure requirements for advisors
offering advisory services in their jurisdictions
Additional Required Registration
Documentation For Investment Advisers
Advisory Activities
Statement / Affidavit
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Alabama
Arizona
District of
Columbia
Florida
Hawaii
Illinois
Maryland
Missouri
Nebraska
New Mexico
Oregon
Pennsylvania
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Rhode Island
Texas
Vermont
Virginia
Branch Office Disclosure
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Alabama
Arizona
Florida
Illinois
Maine (Form BR)
New Hampshire
New Mexico
Ohio
Vermont
Additional Required Registration
Documentation For Investment Advisers
Entity Formation / Foreign
Entity Qualification
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Alabama
California
Illinois
Minnesota
Missouri
Mississippi
Nebraska
New Hampshire
Tennessee
Texas
Washington
West Virginia
EIN / Tax Verification
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Florida
Texas
Vermont
Wisconsin
Additional Required Registration
Documentation For Investment Advisers
Qualifying Principal /
IAR Disclosure
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Alaska
Colorado
Delaware
District of
Columbia
Florida
Idaho
Illinois
Kansas
Kentucky
Massachusetts
Michigan
Nebraska
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Nevada
New Mexico
New York
Oregon
Pennsylvania
Rhode Island
Tennessee
Virginia
Washington
Wisconsin
Fingerprints and
Background Check
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Arizona
Delaware
District of
Columbia
Florida
Georgia
Indiana
Kentucky
Maine
Rhode Island
South Carolina
Washington
West Virginia
Additional Required Registration
Documentation for Investment Advisers
Compliance Manual, DRP
Code of Ethics
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Kansas
Ohio
Rhode Island
South Carolina
Vermont
Virginia
Privacy Notice
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Arizona
Delaware
District of
Columbia
Florida
Georgia
Hawaii
Indiana
Kentucky
Maine
Rhode Island
South Carolina
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Washington
West Virginia
Additional Required Registration
Documentation For Investment Advisers
Advertising Literature and
Promotional Material
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Connecticut
Nebraska
Nevada
New Jersey
Tennessee
Virginia
Books and Records Location
Statement
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California
Illinois
Indiana
Florida
Additional Required Registration
Documentation For Investment Advisers
“Unique” Required Documentation
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Qualified Custodian Contract (Kansas)
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Affidavit for Form ADV Schedule A Owners / Filing Paper Form U4s (Massachusetts)
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DBA Disclosure Forms (Connecticut)
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IA Supplement Application Form (Michigan)
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Designation of CCO on Form ADV (Missouri, Tennessee)
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List of Employees and Duties
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US Citizenship Attestation Form (Nebraska)
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Child Support Good Standing Form (Nevada)
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Clean Hands Form (District of Columbia)
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Proof of Firm Location (Nevada)
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Recordkeeping and Record Retention Affirmation Statement / Compliance With Home State Rule
(Florida, New Jersey, Ohio, Vermont)
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Solicitors Agreements / Letter of Undertaking (Pennsylvania)
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Suitability Form (Washington)
Minimum Net Worth Requirements
Surety Bond
Net Worth Requirements
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Alabama
Arkansas
California
Delaware
District of Columbia
Florida
Hawaii
Idaho
Iowa
Kansas
Maine
Maryland
Massachusetts
Minnesota
Mississippi
Missouri
Montana
Nebraska
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Nevada
New Hampshire
New Jersey
New Mexico
North Carolina
Pennsylvania
Rhode Island
South Carolina
Tennessee
Utah
Vermont
Virginia
Washington
West Virginia
Wisconsin
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Alabama*
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Alaska*
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Arkansas*
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Delaware
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District of Columbia 
Hawaii*
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Idaho*
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Iowa
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Kansas
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Kentucky
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Maine
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Maryland
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Massachusetts*
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Minnesota
Mississippi*
Montana
Nebraska*
New Jersey
New Mexico*
North Carolina
Pennsylvania
Rhode Island
South Carolina*
Utah*
Vermont*
Virginia*
Washington*
West Virginia
* State-specific bond form required
Performance-based Fees
State-specific Performance
Fee Rules
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California
District Of
Columbia
Kentucky
Maryland
North Carolina
Ohio
Oregon
Utah
Vermont
Washington
Wisconsin
Permitted via Relief
Request Only
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Alabama*
Maine
West Virginia*
* Performance-based fees not allowed by
rule but may be allowed by request
Brochures 2A and 2B
Watch Out for Unique Deficiencies
 Cover Pages – “Registered as Investment Adviser”
 Cover Pages – Do not permit “registered” instead use “licensed with”
 Mismatched info between Brochure 2A, Advisory Agreement, and
other submitted documentation
 Do not use acronym RIA or IAR – deemed misleading
 Item 5: Fees – details of how calculated
 Item 5: “Fees not negotiable” language not allowed by some
 Item 6 – Performance fee state-specific language
 Item 10: Risk factors must be specific to advisory business
 Item 14: Required specific language if compensating for client
referrals
Brochures 2A and 2B
Watch Out for Unique Deficiencies
 Item 15, Reporting: Must use specific language regarding delivery of
reports to clients
 Item 15 Custody: State-specific Language
 Item 15 Custody: Some do not permit the use of “indirect” custody
 Item 15 Review of Account: Don’t use “continual basis review”
 Item 17: Proxy Voting – Some states require a proxy policy because
they take position that it is fiduciary duty to vote proxies
 Must include disclosure regarding compliance with GLBA
 Names on Brochure Supplement have to appear exactly as appear
on U4
 If grouped supplement, each IA rep. must have own cover page
Common Deficiencies and
Tips for a Smooth Registration
Watch Out for Common Deficiencies
 Mismatched info between Brochure 2A and Advisory
Agreement
 Failure to provide all required documentation
 Improper material on websites – your own or a third party’s
A Few Tips
 Don’t wait to begin the registration process
 Submit all required documentation at onset of registration
 The regulator is your friend!
 Consult with a firm with experience handling state registrations
Annual Reporting Requirements
State-specific Annual Filings
In addition to the annual update amendment filings, many
states also require advisers to file annual reports directly with
the state
 Financial Reporting Filings
 Branch Office Verifications
 Investment Adviser Representative Verifications
 State unique additional report questionnaires
State Examinations and Audits
State “Hot Button” Issues
 Form ADV and Brochure
 Suitability
 Books and Records Rule
 Complaint File
 Compliance Manual
 Written Advisory Agreements
 Business Cards and Letterheads
 Advertising and Performance Claims
 Financial Statements
 Custody Rule compliance
For More Information
Noula Zaharis
Compliance Director
+1 (404) 607-6938
+1 (404) 805-3225
[email protected]