Office of the Indiana Secretary of State Announces New Rules for Investment Advisers

New federal regulations require advisers with portfolios of up to $100 million to register with the state instead of SEC; up from $25 million.

INDIANAPOLIS (September 29, 2011) – The Office of the Indiana Secretary of State’s Securities Division today advised Indiana’s investment advisers and investors about new federal rules that affect how certain investment advisers are regulated.

The Dodd-Frank Wall Street Reform and Consumer Protection Act made significant changes to the regulation of investment advisers and instructed the U.S. Securities and Exchange Commission to develop rules to implement those changes.

“The oversight of investment advisers has always been a partnership between state and federal regulators, both of which are directly accountable to the investing public,” Indiana Securities Commissioner Chris Naylor said.  “The law recognizes the strong investor protection record of the states by expanding our authority to oversee more investment advisers.”

According to the SEC’s final rules, small- and mid-sized investment advisers with assets under management of less than $100 million will be regulated by state securities regulators. Previously, state regulators were responsible only for investment advisers with assets under management below $25 million. Investment advisers responsible for more than $100 million will be regulated by federal securities regulators. This move is expected to bring from 225 to 275 the total number of investment adviser firms regulated by the Indiana Secretary of State.

Generally, mid-sized investment advisers in Indiana will be prohibited from registering with the SEC, and will have to register with the Secretary of State or otherwise identify a registration exemption.

The final rules also set deadlines for investment advisers to submit their Form ADV and, as applicable, deregister with the SEC. These rules establish a deadline of March 30, 2012 by which each adviser must determine whether it is eligible for SEC registration and file an amended FORM ADV to update the firms’ assets under management. The rules also provide an additional ninety days for advisers no longer eligible for SEC registration to register with the Secretary of State and withdraw SEC registration. The deadline for state registration and SEC withdrawal deadline will be June 28, 2012.  The final rules are on the SEC website here:

The SEC also adopted a federal registration “buffer” for a narrow category of mid-sized investment advisers. “This buffer allows for market fluctuations and their influences on the value of an adviser’s assets under management, ideally reducing an adviser’s need to frequently register or deregister with the various regulators,” Naylor said.

Under the final rules, an investment adviser with assets under management between $100 million and $110 million may remain registered with the SEC even if its later assets under management total falls below the $100 million threshold.  If that adviser’s assets under management drop below $90 million, however, the adviser must withdraw its registration and either register with the state or find an exemption.

Additionally, the final rules adopt new definitions and rules for investment advisers to “private funds,” that is, investment funds that are exempt from the definition of an investment company under federal law. These rules establish new reporting requirements for investment advisers to newly defined venture capital funds and private funds with less than $150 million in assets under management. These rules can be found here:

Importantly, the Dodd-Frank Act repeals federal registration exemptions—and, in doing so, effectively repeals corresponding state registration exemptions—for certain investment advisers in Indiana and other states.  In place of those exemptions, the Dodd-Frank Act and the recently-released SEC rules establish different federal registration exemptions for investment advisers.

“In order to ensure business continuity for Indiana’s investment advisers, the Indiana Secretary of State’s Securities Division has already taken steps to implement correlating state registration exemptions similar to those available prior to the Dodd-Frank Act,” Naylor said.

Finally, the Dodd-Frank Act exempted from the definition of “investment adviser” those advisers who limit their services only to certain family clients. The SEC’s new rules implementing this exclusion for “family offices” can be found here:

The Office of the Indiana Secretary of State will continue to work in collaboration with the SEC and the other states on implementing the Dodd-Frank Act’s changes to investment adviser registration in Indiana.  Investment advisers in Indiana and their clients are encouraged to check the Secretary of State’s website at for future developments or contact the office’s securities division at 317-232-6681 for additional details.


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