Investment Advisers: Get Ready for New Regulatory Requirements
Source: Journal of Accountancy
Last year's Dodd-Frank Wall Street Reform and Consumer Protection Act made dramatic changes to regulation of the financial services industry. CPA financial advisers should pay close attention to new rules regarding investment adviser registration and regulation. Many of the new rules won't take effect until July of this year and still need to be fine-tuned by the SEC or other regulators. But it's a good idea to become familiar with the most significant changes and be prepared for their potential impact on your practice.
Among other things, Dodd-Frank:
- Increases the threshold for registration with the SEC from $25 million in assets under management to $100 million (with certain exceptions). Some investment advisers with less than $100 million under management will have to withdraw their SEC registrations and register with one or more states by July 21, 2011.
- Authorizes the SEC, following further study, to impose a fiduciary duty on broker-dealers similar to that of investment advisers.
- Preserves the “solely incidental” exclusion from the definition of “investment adviser” for accountants, lawyers, and others who do not hold themselves out as investment advisers or financial planners. In addition, the act generally exempts “family offices” from registering as investment advisers.
- Exempts CPAs from oversight by the new Bureau of Consumer Financial Protection.
- Requires advisers to hedge and private equity funds to register, but exempts advisers to venture capital funds.
- Authorizes the SEC, following further study, to subject investment advisers to additional oversight (by the SEC or other organizations) and to impose new requirements on financial planners, whether or not they're registered as investment advisers.
For the complete article, read “New Investment Adviser Requirements of the Dodd-Frank Act: What CPAs Should Know.”
From Journal of Accountancy, American Institute of Certified Public Accountants, November 2010, http://www.journalofaccountancy.com/Issues/2010/Jan.