RIA Registration Services & Consultants
Registered Investment Advisors Team Lead
Former DOJ Trial Attorney
Contact John directlyOne of the most important legal moments in the life of a registered investment advisor (RIA) is registration. RIAs generally have to register with the U.S. Securities and Exchange Commission (SEC) before they can begin advising clients on investment strategies. The registration process is the centerpiece of starting up an investment advising firm, so making a mistake at this juncture can set your professional ambitions back and can even expose your fledgling firm to serious legal liability.
The RIA lawyers and compliance professionals at the national law firm Oberheiden P.C. have guided numerous RIA firms and their stakeholders through this important but tricky process. With our help, RIA professionals have checked off the boxes necessary to legally start up their business, all while resting assured that nothing has been missed.
Many RIAs Have to Register With the SEC
There are generally both state and federal registration requirements for RIA firms. RIAs that do not have to register at the federal level must still generally have to register with their state. Firms that do register with the SEC do not have to also register on the state level, though they generally have to file a notice of SEC registration with states in which they do business.
The federal RIA registration requirement was amended by the Dodd-Frank Act of 2010. It now requires RIAs to register at the federal level with the SEC, instead of merely relying on their state registrations, in certain circumstances such as when:
- The RIA holds $110 million or more in assets under management (AUM)
- The RIA advises investors solely on the internet
- The RIA is exempted from state registration in the state where its principal office and place of business are located, unless there is a valid federal-level exemption, as well
- The RIA is an advisor to an investment company, such as a mutual fund
A firm’s “assets under management” is the amount of regulatory assets that requires the RIA’s ongoing supervision.
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Registration Requirements
RIA firms that are legally required to register with the SEC have to go through the process correctly or face setbacks, delays, or potentially even outright denials of their registration attempt.
The first step is typically to create an account with the Investment Adviser Registration Depository (IARD), a database that is managed by the Financial Industry Regulatory Authority (FINRA). Using information provided by IARD, RIAs can fill out and file their Form ADV and U4 Forms.
The Form ADV is the official registration application, though only Part I of the ADV is filed electronically with the SEC. Part II is a disclosure document for clients that lists the RIA’s services and fees and provides the RIA’s Code of Ethics and lists the firm’s potential conflicts of interest.
Once Form ADV and the U4 are submitted, the SEC may respond with requests for additional information by returning any forms that are incomplete. The SEC will also scrutinize the firm’s finances closely during the registration application process to ensure that the RIA would have the assets necessary to do business safely. The agency has 45 days after the filing of a complete Form ADV to either grant your registration request or to start the proceedings that are necessary to deny it.
RIAs also have to draft a written compliance program that states how the firm intends to comply with the numerous state and federal laws that investment advisors have to follow.
If the SEC approves an RIA’s registration application, the RIA can open and start to assist clients with their investment decisions. However, RIAs have to continue to file documents with the SEC in order to maintain their registration. Chief among them is the annual amendment to Form ADV’s Schedule I, which ensures that the agency has current information about the RIA firm.
The Importance of Getting It Right the First Time
Registering an upstart RIA is a crucial point in the creation of the business. It is a complex affair that requires extensive preparation and a business plan that sees years into the future.
Messing up the registration application with the SEC has some serious consequences. Not only will it lead to a delay in the opening of the business; it can also make regulators at the SEC wonder how serious you are about following the rules. This can lead to suspicion that manifests itself in closer inspection and surveillance of business activities.
By ensuring that the registration application is clean, you can avoid getting started off on the wrong foot.
RIA Registration Exemptions
There are a handful of exemptions to SEC registration. However, if you are going to make use of one of these exemptions, you had better make sure that it actually covers your firm. If you choose not to register with the SEC based on an exemption, but then the agency disagrees with your determination that you are exempt from the registration requirements, you and your firm could find yourselves in hot legal water.
A couple of common SEC registration exemptions are:
- Your RIA already has to register in 15 or more states
- Your RIA is based in New York and has between $25 and $100 million regulatory AUM
- You are a related advisor under the common control of an RIA that is already registered with the SEC
- The RIA is being created under Rule 203A-2(c) and there is an expectation that it will become eligible for SEC registration within 120 days
Another common exemption to registration is for companies that only incidentally offer asset management or investment consulting services. This could be the case for firms of the following types of occupations:
- Broker-dealers
- Bankers
- Attorneys
- Accountants
- Charitable organizations
Even if you think that your RIA will clearly fall within one of these exemptions, it is still worthwhile to get the advice of an RIA lawyer. Many of these exemptions have carve outs and ambiguous language that can complicate what seems like an obvious situation. Furthermore, the costs of getting this determination wrong are very high.
Frequently Asked Questions About Oberheiden P.C. and the RIA Registration Process
Can Registering Correctly Help to Set Up My Compliance Standards?
Yes. The registration process can have far-reaching repercussions, as it requires applicants to tell the SEC what their business is going to look like. By taking the time necessary to work out what your business will entail, you also have the opportunity to determine what your compliance obligations will be and how you will fulfill them. This is done by drafting and adopting a variety of documents, including the RIA’s:
- Code of Ethics
- Policy and Procedures Manual
- Conflict of interest protocols
Having these internal policies in place before your RIA opens is also a wise thing to do.
Do the Investment Advisors at My RIA Have Individual Registration Requirements?
The RIA registration requirement is limited to the firm. However, all of the advisors at the RIA firm, known as investment advisor representatives (IARs), have to pass the Series 65 exam administered by FINRA. Most IARs also take and pass other FINRA exams to add to their qualifications in order to appeal to a broader set of potential clients.
Why Should I Entrust My Firm’s RIA Registration to Oberheiden P.C.?
There are several reasons that numerous RIA companies have relied on Oberheiden P.C. when registering their firm with the SEC – whether for the first time or to maintain their firm’s registration with the agency.
First and foremost, Oberheiden P.C. is a firm composed of very experienced securities litigation lawyers and compliance professionals. This combination is a potent one.
On the one hand, our compliance professionals provide a risk-averse background to the farsighted guidance that they provide. By taking your current position and looking ahead, they can see potential legal issues coming up and can better prepare you for them or even help you avoid them entirely.
On the other hand, our securities litigation lawyers have handled the fallout from numerous compliance systems that have failed and exposed their stakeholders to legal jeopardy. They know what compliance protocols do not work and why they break, which can be just as important as knowing what does work.
By having both of these perspectives on hand, Oberheiden P.C. can handle your RIA registration process with foresight and tact that other firms cannot match.
Second, Oberheiden P.C. is a national firm. No matter where you are registering your RIA, we have local offices nearby that can help.
Why Don’t You Say That Your Firm Offers the Best RIA Registration Services?
These are claims that mean far less when we say them about ourselves than when others say them about us. While we are confident that the experience of our lawyers and compliance professionals is unmatched and that we have a long and storied track record of success, we generally prefer to guide potential clients to the testimonials that prior ones have left about the services that we provided to them.
The RIA Registration Attorneys at Oberheiden P.C.
The RIA and securities litigation lawyers at Oberheiden P.C., together with the firm’s securities compliance personnel, have a long track record of getting RIAs registered with the SEC and in good position for a successful future. Contact them online or call their national law firm at (888) 680-1745.
