Friday, October 17, 2008

New Issue for Federally Registered Advisers

With the markets down 40% or so in the last few months, federally registered investment advisers are facing a new issue - the potential loss of the ability to maintain their federal registration.

Investment advisers with over $30 million in assets under management must register with the SEC. Advisers with assets over $25 million have the option to register with the SEC.

While those are the asset under management issues that have come up over the past few years, we are now seeing a new issue - what happens when my assets fall below $25 million?

Unfortunately, the answer is that you must withdraw your reqistration as a federally registered adviser, and switch to State registration. You must do so within 180 days of the end of your fiscal year where you fall below $25 million, unless you are back over $25 million at that time.

There are some exemptions and twists to that rule, so advisers should consult with their own legal counsel when making these decisions. The State registration process can be costly, and the annual maintenance costs are not insignificant.
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