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What You Need to Know When Registering with the State as an RIA

Rachel Edwards, Esq. and Raquel Vazquez
09.20.2021

Making the decision to break-away or start your new adventure as an investment advisor is exciting! However, the process itself could seem overwhelming and burdensome without the proper assistance.  If you are considering registering as an investment adviser with a state, this month’s Legal Risk Management Tip is for you.

The Registered Investment Advisor (“RIA”) registration process generally takes between 45-90 days. This period covers from the time you initially engage a law firm to begin the paperwork, to when the filing has been officially confirmed by the applicable regulator. There are a number of factors involved that could cause your experience to be either on lower end or higher end of this range. Further, though not common, certain circumstances such as inadequate disclosures or missing or incomplete documentation can at times cause the process to exceed the 90 day range.

One of the first steps in the process is preparing and filing the Form ADV.. Every ADV has multiple parts to it and it is customized specifically to your firm. While there is some basic, boilerplate language in a Form ADV, it is imperative that it is otherwise specifically customized to your practice, the kind of clients you work with, the services you offer, etc. This process may take between 15 to 45 days for completion depending the complexity of your firm and on the amount of back and forth during the drafting and documentation process. Engaging a knowledgeable counsel to assist with your RIA registration process will make the Form ADV process much easier.

Once the RIA registration documents are submitted to the appropriate state securities regulators, you can expect to wait 30 to 45 days to hear back.

A common mistake RIA applicants will make is not supplying the correct forms and documents to the securities regulator. Many correctly submit the Form ADV Part 1, but fail to provide the additional registration documents. When registering directly with the state, it is critical to submit all required documents. Incomplete registration applications will cause unnecessary and costly delays.

Documents Required as Part of the RIA Registration Process

The RIA registration documents and forms required by state securities regulators can vary from state to state. The following are some of the typical documents and forms you can expect to submit to a state securities regulator.

  • Form ADV Part 1A, 1B and Schedules A-D (filed electronically through Web CRD/IARD);
  • Form ADV 2A –Draft and file Form ADV Part 2A – Disclosure Brochure in a customized and advisor branded format.
  • State Specific Requirements. Prepare state specific requirements for primary state, as applicable.
  • Liaison to state security regulators. Your counsel will respond to regulatory inquiries and manage questions or comments to ensure timely registration.
  • Form ADV 2B. Draft Form ADV 2B – Brochure Supplement for Investment Advisor Representatives (“IARs”).
  • Form U4. Draft and file each investment advisor representative (file electronically through Web CRD/IARD);

Additional Requirements

The following are some of the additional requirements which may vary per state:

  • Payment of appropriate licensing and registration fees (paid through Web CRD/IARD);
  • Examinations. Assistance with scheduling of Series 65 or Series 66 exam, as applicable (File U-10 or U-4) for each investment advisor representative.
  • Sample client agreements to be used by the registered investment advisor;
  • Fingerprint cards for each investment advisor representative;
  • Financial statements for the registered investment advisor; and
  • Supplemental forms specific to the particular state.

Additional Compliance Documents

In addition to the RIA registration documents, RIAs will also need to create the following documents to support their compliance programs:

  • Customized Compliance Policies and Procedures:
  • Privacy Policy. Privacy Policy that covers all regulatory requirements and state-specific standards.
  • Code of Ethics. Customized Code of Ethics defining your firms personal trading, gifts and conflict of interest policies.
  • Cybersecurity Policies and Procedures
  • Customized Client Advisory Contracts. Separate custom contracts to match your offerings, including Investment Management and Financial Planning services, as applicable.
  • Advertising Review. Review of advisor advertising materials and/or disclose

Conclusion

As you can see there are a multitude of steps and documentation that need to be taken into consideration when registering your RIA. These tasks are not insurmountable but also require experienced professionals that can assist you with ensuring the execution of the registration of the RIA and filing of the documents listed above is done correctly so that your firm can get started as soon as possible.

Jacko Law Group, PC can help your firm with corporate formations, analyzing where and with whom you need to register, drafting and filing required regulatory forms, and generating important policy and procedure documents to ensure that you are in compliance with state and SEC regulations.

Our team of attorneys will use our extensive experience to assist you with your formation requirements in order to ensure the successful registration of your firm.

Authors: Rachel Edwards, Attorney and Raquel Vazquez, Senior Paralegal at Jacko Law Group, PC (“JLG”). Editor: Jennifer Trowbridge, Junior Partner, JLG. JLG works extensively with investment advisers, broker-dealers, investment companies, private equity and hedge funds, banks and corporate clients on securities and corporate counsel matters.  For more information, please visit https://www.jackolg.com/.

The information contained in this article may contain information that is confidential and/or protected by the attorney-client privilege and attorney work product doctrine. This email is not intended for transmission to, or receipt by, any unauthorized persons. Inadvertent disclosure of the contents of this article to unintended recipients is not intended to and does not constitute a waiver of attorney-client privilege or attorney work product protections.

The Risk Management Tip is published solely based off the interests and relationship between the clients and friends of the Jacko Law Group P.C. ("JLG") and in no way be construed as legal advice. The opinions shared in the publication reflect those of the authors, and not necessarily the views of JLG. For more specific information or recent industry developments or particular situations, you should seek legal opinion or counsel.

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