Academic journal article Journal of Accountancy

SEC, States Divide Advisor Registration

Academic journal article Journal of Accountancy

SEC, States Divide Advisor Registration

Article excerpt

On July 8, the Investment Advisers Supervision Coordination Act took effect, clarifying who has to be registered with the Securities and Exchange Commission and who has to be registered with one or more states. Previously, many advisers had to register with both states and the SEC. The new law applies to all CPAs providing investment advice who do not fall under the so-called accountant's exemption.

On the surface, the provisions are simple: The SEC supervises advisers managing $25 million or more in client assets and the states supervise those managing less. However, there are exemptions and subtleties. "For example, to say you have $25 million under management and are thus eligible for SEC supervision, you have to show you have discretionary authority," Stephanie Monaco, a partner in the Washington, D.C., law firm of Morgan, Lewis & Bockius, told the Journal. "But nondiscretionary advisers may still be able to include nondiscretionary assets that they manage as part of the $25 million floor -- making the advisory entities exempt from state registration -- if they can show they have ongoing responsibility to select or make recommendations based on client needs."

Thorny issues

CPAs with one office who do not meet the $25 million exemption probably will have to work with one state. But such advisers with only offices in several states will have to work with each state's regulations. "Most larger CPA advisers will be better off if they can register with the SEC. It's a lot easier to file with the one agency than with 20 states. …

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