Alternatives to Increase RIA Examination Frequency: RIA in a Box Releases Exploratory Study
NEW YORK, Jan. 8, 2015 /PRNewswire/ -- Today, RIA in a Box (www.riainabox.com), a leading provider of regulatory compliance services and technology to registered investment adviser (RIA) firms, released a study introducing the concept of transitioning additional SEC-registered RIA firms to state regulation in order to improve the frequency of annual regulatory examinations.
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The study recommends that the vast majority of investment advisory firms with $500 million or less in assets under management (AUM) that are currently registered with the SEC should be required to switch to state registration. The study acknowledges that this would be a significant shift in the paradigm of federal vs. state RIA regulation, but notes that such a transition may best align the capabilities of the different regulatory agencies and create a model that could persist for decades.
Previously, as part of the Dodd-Frank legislation, the majority of SEC-registered RIA firms with less than $100 million in AUM were required to transition from SEC to state registration. In total, this led to around 2,100 investment advisory firms switching to state registration.
Today, the majority of approximately 11,850 SEC-registered RIA firms have at least $100 million in AUM. By increasing the SEC registration AUM threshold to $500 million, up to 5,950 firms could potentially shift to state regulation. This would reduce the total number of SEC-registered RIA firms by up to 50.2% leading to approximately 5,900 investment advisory firms remaining registered at the federal level.
"Some may argue that this potential solution is just passing the buck from the SEC to the states," said GJ King, President, RIA in a Box, "However, we are fortunate to have a successful precedent set by the Dodd-Frank transition. The states did an excellent job. As a result, the frequency of the examinations of $25-100 AUM firms has increased and those firms are still in business and thriving as entrepreneurs."
King further states, "We are by no means claiming that an investment advisory firm with $400 million in AUM does not pose a risk to investors. Of course, it may, but we feel the risk that the firm may pose more closely aligns with an $80 million state-registered firm than a multi-billion or trillion dollar SEC-registered firm. As it stands today, a higher percentage of $80 million compared to $400 million AUM firms are being examined on an annual basis. Clearly, we need a better solution to protect investors and the industry."
The RIA in a Box report may be accessed online at: www.riainabox.com/blog/sec-3rd-party-ria-compliance-exams-or-a-shift-to-state-regulation.
About RIA in a Box
RIA in a Box is a leading provider of regulatory compliance and technology services to registered investment adviser firms. RIA in a Box has helped over 2,000 fellow entrepreneurs establish their own RIA firms and remain in constant compliance with regulatory guidelines by pairing a team of former regulators with cutting-edge compliance software.
Contact:
Michelle Akhtar
Email
(866) 611-7638
SOURCE RIA in a Box
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