Progress report
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16/11/2011
Comment: Jonathan Saxton
Jonathan Saxton, regulatory consulting and compliance, Kinetic Partners
When the deadline for registration with the Securities and Exchange Commission (SEC), in accordance with the Dodd-Frank Act, was extended in June, some investment advisers may have breathed a sigh
of relief. However, as the new 30 March 2012 deadline to be SEC-registered looms ever closer, embarking on the registration process should not be at the back of advisers’ minds.
Last month, Kinetic Partners, a global professional services firm to the asset management, banking and broking industry, hosted a seminar explaining the current state of play of Dodd-Frank’s implementation and exactly what advisers should have on their minds right now in order to meet the SEC’s new requirements.
The SEC’s delayed implementation of registration rules has given investment advisers a much-needed opportunity to clarify their required course of action, but there is evidently still some confusion as to exactly who needs to register with the SEC.
As the rules currently stand, non-US advisers with no presence in the US need not register with the SEC if they have fewer than 15 clients and private fund investors in the US, manage less than $25m AuM attributable to US clients, and do not hold themselves out to the public in the US as an investment adviser. Venture capital advisers and private fund advisers are also exempt from SEC registration but will have to submit annual filings as “exempt reporting advisers.”
Even though exempt reporting advisers do not have to undergo a full registration process, the relevant paperwork (abbreviated Form ADV1) still needs to be submitted to the SEC between 1 January and 30 March 2012, although the 45-day review period does not apply for these advisers’ submissions. This information will become publicly available and the SEC retains the right to visit exempt reporting advisers.
For those advisers that do not qualify for any of the exemptions, now is the time to address registration. Although advisers seeking to register must submit their application by 14 February 2012 (it may take up to 45 days for the SEC to approve an initial application), there is still plenty of time to meet the deadline, and the registration process itself need not be onerous. Going through the application steps online is a fairly straightforward process and since it takes only 45 days to complete, this is significantly less time than it takes to become FSA-authorised.
The requirements to be SEC-compliant are not greatly different than those to be FSA-compliant, and many of the processes and procedures will be the same – so advisers are likely to find that they are already half way to meeting the requirements without even realising it. The key actions required will be to appoint a chief compliance officer, to undertake a gap analysis between existing procedures and those required once SEC-registered, to develop and implement a compliance infrastructure to meet SEC requirements, and to complete the ADV1 and ADV 2 forms.
Once registered, advisers will need to submit regular filings and maintain the necessary compliance procedures and infrastructure on an ongoing basis. Advisers will also need to be prepared for possible visits from the SEC, a process which is likely to be much more detailed and aggressive than a visit from the FSA. However, while the SEC is well known for its forensic approach, visits to UK advisers are not likely to be frequent. With a huge influx of new information post-30 March 2012, SEC resources will be extremely stretched in the US and visits to UK advisers are expected to be chosen according to a risk-based approach.
If advisers start preparing now, by assessing their current infrastructure and processing the required forms, applications can realistically be submitted early in the new year. But leave the decision until it is too late and there is likely to be a last-minute rush, with the potential for undue difficulties.
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60 seconds with... Kenneth Turchin
CAN YOU DESCRIBE YOUR CURRENT ROLE?
I have worked in public accounting and hedge funds and in the past eight years have been selling middle- and back-office services to the alternate investment industry. My role is to build relationships with clients, teach them about SS&C’s products and services, and ensure seamless transactions every time the firm launches a new fund.
IF YOU WERE DOWN TO YOUR LAST £1,000, HOW WOULD YOU INVEST IT?
I would buy THREE shares in Apple and hope for a repeat 383% return in the next five years.
WHAT WOULD YOU DO IF YOU WERE IN PRESIDENT OBAMA’S SHOES?
That’s one pair of size 12 shoes I do not want to be in!
WHO WOULD PLAY YOU IF THEY MADE A MOVIE ABOUT YOUR FIRM?
Kevin Bacon. He is a versatile actor and the centre of the entertainment universe. I am in sales. Everyone in the industry would be linked to me in six steps or less. My client list would be ridiculous.
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