Page 50 - Investment Advisor March 2021

THE COMPLIANCE COACH

By Thomas D. Giachetti

New Registration Rules in New York

Could Have Far-Reaching Impact

Advisors working or providing advice from the Empire State must comply.

he New York Attorney General IAR registration requirements exists
announced on Dec. 1, 2020 with respect to persons who acts as
Tamendments to the New York IAR or solicitors to five or fewer clients.
Investment Advisory Act that will For the purposes of this exemption, a
require many investment advisor rep- person need not be counted as a client
resentatives (IARs) to register with the if no compensation is received for the
State of New York. If you render invest- IAR’s advisory services. This exemption
ment advice within or from the State is available to all IARs and solicitors of
of New York, now is the time to begin both state- and SEC-registered advisors.
reviewing the rule and your registration
obligations. This new law applies even if IMPLEMENTATION PERIOD
you previously filed a NY-IAQ on behalf The rules contain an implementation
of a state-registered investment advisor. period allowing those in an advisory busi-
Beginning on Feb. 1, 2021, IARs of state- the rules as: “…a person who as part ness to continue without approved reg-
registered and Securities and Exchange of a regular business, engages in the istration until Dec. 2, 2021, as long as
Commission-registered investment advi- business of providing investment advice the U4 requesting the IAR’s New York
sors are required to meet examination to the limited extent that such person registration is submitted on or before Aug.
and registration requirements with the receives compensation for introducing 31, 2021. The rules also provide for an
State of New York. The rules will impact a prospective investor or investors to [a examination waiver for those who have
firms with IARs and/or solicitors in New state-registered] investment adviser or been IARs for at least two years prior
York, including firms principally located a federally covered investment adviser.” to Feb. 1, 2021 so long as they are not
in other states but maintain a New York Solicitors for state-registered invest- subject to a regulatory disqualification.
branch office and/or solicitor(s). ment advisors generally will need to be IARs also may request an exami-
IARs of State-Registered Advisors: registered as an IAR with an investment nation waiver if they currently hold a
Under the rules, an IAR of a state-regis- advisor or will otherwise need to indi- professional designation and remain in
tered firm is defined as “a natural person vidually file a Form ADV and Form U4 good standing.
representing an investment adviser or for their solicitation activities. The Office of the Attorney General
solicitor in doing any of the acts that Solicitors of SEC-Registered provided helpful information for financial
define an investment adviser.” Those acts Advisors: “Affiliated solicitors” (solici- professionals and compliance profession-
generally include engaging in the invest- tors under the supervision and control als that summarize what should be done
ment advisory business within or from of the advisor) only can be compelled to to apply or request an examination waiver.
the State of New York. In addition, all register if they have a place of business Lastly, the Rules include a new books
principals and supervisors of New York- in New York and meet the definition of and records obligation that require
registered advisors must be registered, IAR under the federal definition. IARs to keep documentation that sup-
unless a registration exemption applies. “Unaffiliated solicitors” (solicitors ports the designation of any client as an
IARs of SEC-Registered Advisors: who operate independent of the advisor) “accredited investor” or “qualified cli-
For individuals acting on behalf of SEC- will generally need to be registered as an ent,” as defined under federal law.
registered firms from a place of business IAR with an advisor or will otherwise
in New York, the rules defer to the fed- need to individually file a Form ADV and Thomas D. Giachetti is chairman of the TierneyMJ/Shutterstock
eral definition of IAR. Form U4 for their solicitation activities. Investment Management and Securities
Solicitors of State-Registered De Minimis Exemption (All Firms): Practice Group of Stark & Stark. He can be
Advisors: “Solicitors” are defined under A de minimis exemption to New York’s reached at [email protected].

48 INVESTMENT ADVISOR MARCH 2021 | ThinkAdvisor.com