Offering Legal & Fiduciary Services to Traders | Investors | Hedge Funds State Investment Adviser Registration
Capital Management Service Group, Inc. is dedicated to providing the highest quality of services on a personal level and in a timely manner. We offer flat-fee engagements, which include start-to-finish legal services and counsel with all aspects of launching a domestic or offshore hedge fund. No two funds are identical. We use a client-based approach to our fund structuring and analysis. Our clients routinely comment on the excellence of our personal service and the time we take to properly understand and implement the client’s unique circumstances and objectives. Call Us at +1(307) 213-4732, Email Usand Read What Our Client Say About Us on LinkedIn
Investment Adviser Registration The Investment Advisers Act of 1940 regulates the activities of investment advisers. Section 203A(a)(1) of the Advisers Act requires any investment adviser that is not "regulated or required to be regulated" as an investment adviser in the state in which it has its principal office and place of business (domicile state) to register with the SEC without regard to the amount of assets under management (i.e., as in Wyoming).
An "investment adviser" is defined as "any person who, for compensation, engages in the business of advising others, either directly or through publications or writings, as to the value of securities or as to the advisability of investing in, purchasing, or selling securities."
There are three elements: for compensation; engaged in the business; and provide advice about securities. A person or firm must satisfy all three elements and not fall into a statutory exclusion to be regulated under the Advisers Act. There is also considerable law interpreting each of the elements of the above definition.
Dodd-Frank The Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) increases states’ authority in the area of investment adviser regulation by raising the threshold from $25 million to $100 million assets under management. Generally speaking, this affects investment advisers registered with the Securities and Exchange Commission (“SEC”) with less than $100 million in assets under management . They must switch to state registration from SEC oversight.
Mid Size Investment AdvisersUnlike smaller advisers, a Mid-Sized Adviser (i.e., those with between $25 million and $100 million assets under management) must register with the SEC if (i) it is not required to be registered in its domicile state; or (ii) even if it were so registered, it would not be subject to examination by the securities commissioner (or similar authority) of the domicile state. A Mid-Sized Adviser that relies on an exemption under the laws of its domicile state to avoid registration in that state must instead register with the SEC (unless an exemption from federal registration is available).
Hedge Fund Managers Must Register if Not Exempt Congress intends that advisers to private funds (i.e., hedge funds, private equity funds, and other pooled investment vehicles that are exempted from the definition of “investment company” under Sections 3(c)(1) or 3(c)(7) of the Investment Company Act of 1940) register under the Advisers Act. Section 202(a)(29) of the Advisers Act defines the term "private fund" as "an issuer that would be an investment company...but for Section 3(c)(1) or 3(c)(7) of" the Investment Company Act.
State Registered Investment Advisers In the United States, each state is responsible for licensing, monitoring and overseeing all hedge funds and other alternative investment management firms with assets under $100 million. While Dodd-Frank lays out a more defined set of registration requirements driven primarily by AUM (assets under management), it does not create rules on the qualifications of individuals to be a private fund manager and does not alter state law requirements for investment advisers. This represents a significant increase in the responsibility and jurisdiction of state securities departments and law enforcement officials. Contact us before assuming that the investment adviser registration laws don't apply to you!
SEC De-Registration Certain smaller investment advisers previously eligible to register with the SEC must transition down to state registration. This group of investment advisers are termed "state registered investment advisers." The state-level investment adviser registration process is becoming more complex and slow. State investment advisers are subject to more scrutiny as well. Contact Us for Help to De-Register from SEC Registration
What are Investment Adviser Representatives? A firm is a registered investment adviser--a person is not a registered investment adviser. Under state law, "investment adviser representatives" are persons who are employed by investment adviser firms and engage in such activities as rendering investment advice, making recommendations concerning securities, soliciting new customers or are active in managing accounts or portfolios for clients, among other duties.
Investment adviser representatives must pass a qualifying examination and are required to be registered. Other frequently used terms to describe persons rendering these types of services include: financial planner, money manager, financial consultant, asset allocation analyst, or fee-only planner.
Counting Investors An investment adviser may treat as a single client a natural person and: (i) that person's minor children (whether or not they share the natural person's principal residence); (ii) any relative, spouse, spousal equivalent or relative of the spouse or of the spousal equivalent of the natural person who has the same principal residence; (iii) all accounts of which the natural person and/or the person's minor child or relative, spouse, spousal equivalent or relative of the spouse or of the spousal equivalent who has the same principal residence are the only primary beneficiaries; and (iv) all trusts of which the natural person and/or the person's minor child or relative, spouse, spousal equivalent or relative of the spouse or of the spousal equivalent who has the same principal residence are the only primary beneficiaries. The rules allow an investment adviser to treat as a single client: (i) a corporation, general partnership, limited partnership, limited liability company, trust, or other legal organization to which the adviser provides investment advice based on the organization's investment objectives, and (ii) two or more legal organizations that have identical shareholders, partners, limited partners, members or beneficiaries.
Investment Newsletters Section 202(a)(11) of the Investment Advisers Act of 1940 defines "investment adviser" in part as "any person who, for compensation, engages in the business of advising others, either directly or through publications or writings, as to the value of securities or as to the advisability of investing in, purchasing, or selling securities, or who, for compensation and as part of a regular business, issues or promulgates analyses or reports concerning securities."
Expressly excluded from the definition is "the publisher of bona fide newspaper, news magazine or business or financial publication of general and regular circulation." Section 401(f) of the Uniform Securities Act, upon which the majority of state securities laws are based, similarly excludes from the definition of investment adviser a publisher of any bona fid newspaper, news column, newsletter, news magazine, or business or financial publication or service, whether communicated in hard copy form, or by electronic means, or otherwise, that does not consist of the rendering of advice on the basis of the specific investment situation of each client. Since a bona fide newsletter publisher is not an investment adviser, registration as such is not required.
What is Holding Out? None of the exemptions from investment adviser registration apply if you "hold out" to the public. A person is deemed to "hold himself out generally to the public" as an investment adviser if he lets it be known by word of mouth through existing clients or otherwise, that he is willing to take on new clients.
You are holding yourself out as an investment adviser if you: use the term investment adviser or similar term on a business card or stationary; are listed as an investment adviser in a telephone, business or building directory; or let it be known generally by word of mouth or otherwise that you are available to provide investment advice or you will accept new clients. If you hold out you are not exempt from registration as an investment adviser.
If you identify yourself as an investment advisor to anyone or use business cards, letterhead, a web site, a mass mailing, a trade show display, etc., you cannot rely on the private adviser exemption to avoid registration. If you tell others by word of mouth or otherwise that you are available to provide investment advice, advisory services, or that you will accept new clients, you cannot rely on the private advisor exemption to avoid investment adviser registration.
Use of Investment Adviser Website The SEC stated that an investment adviser that posted only information about private funds on a password protected web site is not holding itself out generally to the public. This ruling was based on the use of procedures designed to limit access to the web site information to a select group of accredited investors and the requirement that managers of the private funds agree to post only information related to these funds on the website and not to offer other services or products on the site.
Exam Requirements and Waivers There is no exam requirement by the SEC at the federal level. Most states require the Series 65 Exam - Uniform Registered Investment Adviser Examination. The Series 65 exam is waived by some states if the applicant has the CFP (Certified Financial Planner), the ChFC (Chartered Financial Consultant), APFS (Accredited Personal Financial Specialist), CFA (Chartered Financial Analyst), the CIC (Chartered Investment Counselor), or other designations or items as ruled by the (state) administrator.
What is the Series 65 Exam? The Series 65 exam is designed to qualify candidates as investment adviser representatives. The exam covers topics you need to understand in order to provide investment advice to clients. The Uniform Investment Adviser Law Examination consists of 130 questions plus 10 pretest questions covering the materials outlined in the following study outline. Applicants are allowed 3 hours to complete the examination. At least 89 (68.5%) of the questions must be answered correctly for an individual to pass the Series 65 exam. Some states require the principal of the RIA to pass the exam with a score greater than 70%. The examination is conducted as a closed book test.
Upon completion of the examination, the score for each section and the overall test score will immediately be made available to the candidate. The examination is administered by the FINRA. To schedule a candidate for the examination, an individual's firm should file an electronic Form U-4 or the individual should file a paper Form U-10 and pay the $135.00 examination fee to the FINRA at the following address: Send checks and U-10's to: FINRA - Field Support P.O. Box 5054 Philadelphia, PA 19175-5054. Once registered, FINRA will open a 120-day window within which you may schedule the exam.
What about the Series 66 and Series 7 Exams? An alternative to the Series 65 is the combination of the Series 7 and Series 66 exams. The Series 66 is only good in conjunction with the Series 7; most states will not sponsor a candidate for the Series 7. The Series 7/Series 66 combination is generally used by an employee of a brokerage firm who is also registering as an investment adviser. Essentially, the Series 66 equals the combination of the Series 65 and Series 63 exams. A sponsor is not required to take either the 65 or 66 exams. The Series 66 is not valid until you pass the Series 7 exam.
I passed the Series 65; now what? Just passing the exam is only the first step. You must complete the registration process before you can solicit accounts. Successful completion of the Uniform Investment Adviser Law Examination does not excuse you of the personal responsibility to know and to abide by the specific requirements of the securities laws and regulations of the states in which you conduct business. Furthermore, although successful completion of the examination may satisfy a portion of the requirements of a particular state, it does not convey the right to transact business prior to obtaining a license from the state to conduct an advisory business.
Requirements for Investment Advisers that Advertise To protect investors, the SEC prohibits certain types of advertising practices by advisers. An "advertisement" includes any communication addressed to more than one person that offers any investment advisory service with regard to securities. An advertisement could include both a written publication (such as a website, newsletter or marketing brochure) as well as oral communications (such as an announcement made on radio or television).
Advertising must not be false or misleading and must not contain any untrue statement of a material fact. Advertising, like all statements made to advisory clients and prospective clients, is subject to the general prohibition on fraud. Specifically prohibited are: testimonials; the use of past specific recommendations that were profitable, unless the adviser includes a list of all recommendations made during the past year; a representation that any graph, chart, or formula can in and of itself be used to determine which securities to buy or sell; and advertisements stating that any report, analysis, or service is free, unless it actually is free. You may not imply that the SEC has sponsored, recommended or approved you, based upon your registration. You cannot use the term "registered investment adviser" unless you are registered, and you should not use this term to imply that as a registered adviser, you have a level of professional competence, education or special training.
For example, you cannot use the term "RIA" after your name because using initials after a name usually indicates a degree or a licensed professional position for which there are certain qualifications.
Requirements for Investment Advisers that Pay Others to Solicit New Clients Registered investment advisers may pay cash compensation to others to seek out new clients on their behalf ("solicitors" or "finders") if they meet certain conditions. The fee must be paid pursuant to a written agreement to which you are a party and (with limited exceptions) the agreement must: describe the solicitor's activities and compensation arrangement; require that the solicitor perform the duties you assign and in compliance with the Advisers Act; require the solicitor to provide clients with a current copy of your disclosure document; and, if seeking clients for personalized advisory services, require the solicitor to provide clients with a separate written disclosure document containing specific information. You must receive from the solicited client, prior to or at the time you enter into an agreement, a signed and dated notice confirming that it was provided with your disclosure document and, if required, the solicitor's disclosure document. You must have a reasonable basis for believing that the solicitor has complied with the terms of your agreement.
Call Us First We are experts in international hedge funds and tax. Click on any reference below to our leading articles:
Follow @HannahTerhune
Read leading, cutting-edge articles on hedge funds and taxes by Hannah Terhune, hedge fund and international tax attorney. Her articles are widely published on the Internet and recommended by TheStreet.com and other respected media.
Capital Management Services Group, Inc. is recognized by discriminating business owners as being the foremost tax and legal authority in the hedge fund industry. Attorney Hannah Terhune's education and experience are unsurpassed in the area of hedge fund creation, development and launch. Ms. Terhune's extensive international tax knowledge and hedge fund experience have made her an indispensable resource for serious hedge fund and business professionals. Ms. Terhune's numerous articles on the subjects have appeared in over 100 publications worldwide. Chances are, if you have read anything related to the hedge fund business, Ms. Terhune wrote it.
Why Hire Us? When you engage us you get a unique combination of securities, tax, and global business experience. We think we have the best set of offering documents in the industry for hedge funds based on current and ever changing laws. We aim to deliver quick turnaround times because we understand that our customers want to begin their money management business as soon as possible. We conceive, structure and deploy the best tax saving strategies for your hedge fund business. We will help you start your business as soon as possible and continue to assist you.
Give us the opportunity to use that knowledge and experience for you. Each client receives personalized attention from our attorneys and staff. No client is too large or small for us. We pride ourselves in providing personal attention to each client. We provide the best services and support needed for hedge funds and business projects. No need to coordinate work between accounting, administrative and law firms--we handle the entire hedge fund business process from start to finish. We offer legal services, accounting services, tax planning services, tax return preparation services, business consulting services, and U.S. and offshore company formation services. We provide high quality services at competitive rates. But don't take our word for it, give us a call and let us prove what we can do for you.
Personal Consultations You get answers to your specific questions by speaking directly to Hannah Terhune, an experienced hedge fund and international tax attorney. Ms. Terhune's hard-earned knowledge and experience can be put to work to save you unnecessary steps and costly wasted effort. The consult is an invaluable opportunity to speak to Hannah one-on-one and learn how to achieve more in less time. Ms. Terhune's credentials and experience gives you access to a well-informed professional practitioner with sound ethical judgment. The availability of such expertise required to recommend the best solutions to you and provide sound ethical advice should never be taken lightly. We are confident that when you are finished with your consultation you will be impressed and more informed about your business plans than ever before. Call (307) 213-4732 orClick Here to Request Services.
Our Commitment Henry David Thoreau wrote: "Do not hire a man who works for money, but him who does it for love of it." We are committed to your business plans and bringing you the best possible options. We are an established and internationally recognized law firm that serves and educates our clients throughout the industry. We do this by striving for the best results. A lawyer is a philosopher and role model. The ability to improve our clients' lives is a privilege that we do not take lightly. There is tremendous power in being able to effect a positive change in our clients' lives. Our aim is to welcome our clients and to provide a comfortable, warm environment for all. Thanks for visiting our website. We hope to have the opportunity to serve you.
