California Issues Notice to Advisers Required to Transition from SEC to State Registration

SEC-registered investment advisers with assets under management between $25 million and $100 million will generally be required to transition to state registration under the Dodd-Frank Act. Using information obtained from IARD, the California Department of Corporations issued a notice to firms that will likely be required to withdraw from SEC registration and become registered in California . Due to the large number of firms that are expected to transition, the Department is encouraging firms to file the application as soon as possible, since the application must be approved (not just filed) by June 28, 2012, or the firm’s registration will lapse.

The letter also reminds firms that advisers currently registered with the SEC must file an annual updating amendment to Form ADV no later than March 30, 2012, whether or not a state application has been submitted. For California applications that are submitted and approved by the end of 2011, firms can elect to have the registration take effect in 2011 or request that the Department grant registration effective as of January 1, 2012, which would permit the adviser to avoid having to pay duplicate IARD renewal fees. To assist firms in the transition process, the Department also provided step-by-step instructions detailing the steps necessary to complete the transition, including amendments to Form ADV Parts 1 and 2, additional California-specific forms required for state-registered advisers, and instructions for filing Form ADV-W to withdraw from SEC registration.

As noted in the Department’s letter and instructions, advisers with a principal place of business in California and assets under management between $25 million and $100 million should consider taking steps to complete the transition to state-registration as soon as possible to ensure approval of the application by the deadline. For additional information or assistance with transitioning from SEC to state registration, please contact Zac Rosenberg, Compliance Consultant, at zachary.rosenberg@corecls.com or 619-278-0020.