transitioning from sec to state registration this material is designed for an investment...

Transitioning from SEC to State RegistrationTransitioning from SEC to State Registration

This material is designed for an investment professional audience, primarily Registered Investment Advisors (RIAs). TD Ameritrade Institutional, Division of TD Ameritrade, Inc., member FINRA/SIPC/NFA. TD Ameritrade is a trademark jointly owned by TD Ameritrade E IP Company, Inc. and The Toronto-Dominion Bank. © 2010 TD Ameritrade IP Company, Inc. All rights reserved. Used with permission.

October 21, 2010

Skip Schweiss, Managing Director of Advisor Advocacy,

TD AMERITRADE Institutional

Scott Eric Gottlieb, President,

U.S. Compliance Consultants, LLC

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Disclosures

The following presentation is for general discussion purposes only and is not to be construed as legal advice for any person and/or firm. Some of the discussion points and answers to FAQs have been abbreviated, so you are encouraged to read the full version of SEC IA Release No. 3060 and consult with your attorney or regulatory consultant. 

TD Ameritrade Institutional, U.S. Compliance Consultants and Stark & Stark are separate, unaffiliated and not responsible for services or policies.

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Introduction

Wall Street Reform Act

Impact on Advisers

Today’s Goals

State Registration Process

Q&A

Agenda

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Introduction

36% of attendees to the first webcast in the “What Financial Regulatory Reform Means for You,” series responded that their firm’s AUM fell between $25 – $100 million*

Results from the August 2, 2010 webcast poll

Insert pie chart

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Polling question

What is your firm’s AUM?

Below $25 million

Between $25 – $90 million

Between $90 - $110 million

Between $110 million - $500 million

Over $500 million

Scott Eric Gottlieb, President,U.S. Compliance Consultants, LLC

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Introduction

Dodd-Frank Wall Street Reform and Consumer Protection Act

Spans over 2,300 pages

Affects almost every aspect of the U.S. Financial Services Industry

More on the way . . .

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Ends the “private investment adviser” exemption from SEC registration

Requires that most advisers to hedge funds register with the SEC

Changes the definition of “accredited investor”

Carves out “family offices” from the definition of investment adviser

Raising the threshold for registration with the SEC from $25 million in AUM to $100 million in AUM

Introduction

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Wall Street Reform Act - Raising the Threshold

Current Regulations

Below $25 million: Must register with one or more states

Between $25 million and $30 million: May register with either the SEC or one or more states

$30 million and Above: Must register with the SEC

New Regulations

Below $100 million: Must register with one or more states

$100 million and Above: Must register with the SEC

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Wall Street Reform Act - Exceptions

Multi-State Exemption

Nationally Recognized Statistical Rating Organization

Pension Consultant

Internet Investment Adviser

Newly Formed Adviser – 120 Day Exemption

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Impact on Advisers

4,200 SEC-Registered Investment Advisers

Must transition to registration with one or more states

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Impact on Advisers

SEC-Registered Advisers:

More Frequent Examinations

More Intense Examinations

Transitioning Advisers:

More Rigorous Registration Process

Unfamiliar Regulatory Environment

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Cause for Celebration!

Good-Bye Compliance Rule

Good-Bye Code of Ethics Rule

Good-Bye Proxy Voting Rule

Good-Bye Privacy Rule

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Pause the Celebration

Hello Compliance Rule

Hello Code of Ethics Rule

Hello Proxy Voting Rule

Hello Privacy Rule

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Cause for Concern?

Unfamiliar State Rules

Minimum Capital Requirements

Financial Reporting

Custody/Bonding Requirements

More Stringent Rules

Identity Theft

Data Security

Anti-Money Laundering

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Today’s Goals

Understanding the Transition Process

Avoiding Common Mistakes

Providing you with Peace of Mind

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Important Transition Information

Must have an effective registration with at least one state

Only then can you withdraw from SEC registration

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Timing of the Registration Process

SEC Registration

Typically no longer than 45 days

Often much quicker

State Registration

Best case scenario – 45 to 60 days

Typical scenario – 60 to 90 days

Worst case scenario – Up to 6 months

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Polling question

Are you concerned about the states’ ability to handle the number of new registrations resulting from the transition?

Yes

No

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The Role of the State Regulator

Significant Involvement

Back and Forth

Multiple Requests for Additional Information

Respond Quickly

Courtesy and Respect

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Get an Early Start on the Registration Process

Determine in which state or states you must register

Visit the web sites of these states

www.nasaa.org/about_nasaa/2062.cfm

Checklists, Rules and Regulations

Documents filed via IARD

Documents filed directly with the State

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Where to Register

Any state where your advisory firm has a physical presence

Home Office

Branch Office

Location of Investment Adviser Representatives

Any state where you have noticed filed

De minimis rules

Multiple States = Multiple Registrations

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Polling question

If you have to transition from SEC to state registration, how many states will you have to register in?

1 state

2 – 5 states

6 – 9 states

10 – 14 states

15 or more

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Primary Registration Documents

Form ADV Part 1A

Form ADV Part 1B

Form ADV Part 2

Form U-4

Advisory Agreements

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Supplemental Registration Documents

Financial Statements Corporate Formation Documents Affidavit of No Prior Investment Adviser Activity Designation of Supervisor Tax Certification Form Workers Compensation Coverage Affidavit Statement of Citizenship and Immigration Status Copies of all Marketing Material and Advertising Proof of E&O Coverage Surety Bond Form Fingerprint Cards Compliance Manual Code of Ethics Compliance Attestation

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What State Regulators Focus On

High Level of Scrutiny

All Required information – Pursuant to State Rules

Internally Consistent

Consistency Among Registration Documents

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Financial Statements and Net Worth Requirements

Financial Statements

Balance Sheet

Income Statement

Audited Statements or GAAP

Minimum Net Worth/Net Capital Requirements

Custody

Discretion (No Custody)

Prepayment

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Deregistering From the SEC

Form ADV – W

Status Section

Partial Withdrawal

Indicate Jurisdiction - SEC

Complete Items 1A through 1D

Do NOT complete Item 1E or Items 2 through 8

Q&A

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Contact Information

Scott Eric Gottlieb, President,U.S. Compliance Consultants, LLC 888-798-2930seg@uscomplianceconsultants.com