State De Minimis Registration Considerations for Advisors

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Federalism can be a real pain in the neck sometimes. While the duality of both state and federal government has endured and served our country well, it has made investment advisor registration at the state level a mix of hard-to-find statutes, non-intuitive exceptions and revenue grabs. The most notable of these state-by-state registration quirks is the infamous “de minimis” exemption from registering as an investment advisor in a particular state. The National De Minimis Standard, as it is officially referred to, is contained in Section 222(d) of the Investment Advisers Act of 1940. It traces its roots back to 1997, […]

The Implications of Investment Discretion

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Last month I penned an article that described how the SEC expects advisors to calculate their Regulatory Assets Under Management (“RAUM”) with respect to investment management and financial planning clients. Only securities portfolios for which the advisor provides “continuous and regular supervisory or management services” count toward RAUM, but advisors that do so on a discretionary basis have a lower burden to overcome than non-discretionary advisors. This month’s article attempts to answer the next logical question: how do I know if my firm has investment discretion? The simplest definition can be found in the Form ADV Glossary, which states that […]

Financial Planning & Regulatory Assets Under Management

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As the financial services industry continues to evolve, so, too, does the distinction between “investment management” and “financial planning” as discreet but complementary services that a registered investment adviser can provide to clients. I’d read two of Michael Kitces’ recent posts for a more fulsome discussion of an “investment-centric” versus a “financial-planning-centric” firm culture (here and here), but suffice to say it is not a distinction without a difference. The former focuses on managing or recommending a portfolio of securities on behalf of a client, and the latter focuses on life decisions that have some sort of financial impact (managing […]

Four Useful Hacks for the SEC’s IAPD Disclosure Site

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It’s been said that the eyes are the window to a person’s soul, but I’d argue that a person’s internet browsing history is also pretty telling. It can reveal a lot, and in my case it revealed that I am a complete and incorrigible fanboy of the laws, rules and regulations that smother surround the financial services industry – particularly the Securities and Exchange Commission’s disclosure regime. More specifically, my history reveals repeated visits to the SEC’s Investment Adviser Public Disclosure website, or IAPD, at Congress required that the SEC establish “a readily accessible electronic process to respond to […]

Maintaining Attorney-Client Privilege During a Mock Exam

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The principle of attorney-client confidentiality is sacrosanct. In California, for example, an attorney may only reveal a client’s confidential information to the extent the attorney “reasonably believes the disclosure is necessary to prevent a criminal act that the [attorney] reasonably believes is likely to result in death or substantial bodily harm.” This is a narrow exception with a lot of conditions: the information must be reasonably believed by the attorney, the disclosure must be necessary, the threatening act must becriminal, and be likely to result in death or substantial bodily harm. If even one condition isn’t met, the attorney is […]

FINRA Peeks Behind the Algorithm’s Curtain

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On the heels of the Financial Industry Regulatory Authority issuing a Report on Digital Investment Advice last month, on April 7 the Securities and Exchange Commission approved a FINRA rule amendment that requires registration of persons that are “primarily responsible for the design, development or significant modification of algorithmic trading strategies, or who are responsible for the day-to-day supervision or direction of such activities.” The fundamental proposition is that all algorithms are conceived and built by humans, and said humans should be both qualified and readily identifiable so they may be held accountable for any harm their creations cause. The […]

A Less Controversial, but Just as Important, Fiduciary Duty

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This year will go down in history as the year of the great fiduciary wars: advisors v. brokers, DOL v. SEC, Senator Elizabeth Warren v. the entire financial services industry…the list could go on. Tensions have flared and much ink has been shed. When the dust and rhetoric settles, the highest casualties will likely be suffered by the investing public and their confidence in our industry and government representatives. But alas, I digress. I’m here today not to wax poetic about the fiduciary duty owed by advisors to their clients, but instead to offer some insight into a less controversial […]