New York is the nation’s financial capital, but this year it will become the last state to register investment adviser representatives working within its borders — a move that will allow potential clients to more easily review advisers’ backgrounds.
On Feb. 1, a new regulation went into effect that requires New York IARs to register with the state’s attorney general by filing a Form U4 through the Investment Adviser Registration Depository. The implementation date is Dec. 2.
But a couple of deadlines are coming up over the summer. New Form U4 applications must be submitted by Aug. 31. The deadline for a mass registration process for firms with 20 or more IARs is the end of June.
Over the last two years, New York has implemented technology that has made electronic filing feasible. Fabien Levy, a spokesman for New York Attorney General Letitia James, wrote in an email.
Now the Attorney General’s office will be better able to monitor the relationships between IARs and their affiliated registered investment advisers and ensure IARs meet minimum exam requirements.
“Overall, these rules serve to make the securities industry more transparent to the Office of the Attorney General in addition to investors,” Levy wrote.
Investors will be able to access an IAR’s information through the Central Registration Depository, something that has been occurring in every state.
“This is a drastic shift for New York,” said Robert Boeche, a partner at Shustak Reynolds & Partners. “It increases investors’ knowledge. They will now have an ability to review the regulatory history and any disclosure events of their advisers. They didn’t have that opportunity before if the adviser was only operating in the state of New York.”
Under the Dodd-Frank financial reform law, investment advisers with less than $100 million in assets under management fell under state regulation, while larger advisers continued to be overseen by the Securities and Exchange Commission.
The move by New York to register IARs provides more regulatory transparency into that segment of the investment advice market, said A. Valerie Mirko, a partner at Baker McKenzie.
“From an investor protection standpoint, it closes one last gap,” Mirko said. “There is a natural extension of all the changes that came into place after the last financial crisis.”
New IARs must pass one or more securities licensing exams before registering with the state, according to the New York Investor Protection Bureau. They must complete their exams by Dec. 2.
Examination waivers are available for IARs who have been working in the state for two years or more for a state- or federally registered investment advisory firm or a dually registered firm. IARs working for firms registered only as broker-dealers are not eligible for exam waivers.
“Many previously unregistered investment advisory professionals will need to sit for examinations and register with the state during the relatively short implementation period,” Boeche wrote in an analysis.
Advisory firms have known about the registration requirement, and it shouldn’t be too heavy a regulatory burden, Mirko said.
“Firms have all the internal and external tools they need for this not to be a big deal in terms of coming into compliance,” she said.
Andrew is half-human, half-gamer. He’s also a science fiction author writing for BleeBot.