Monday, December 17, 2012

A White Paper to Help You with Your Annual CCO Report

As you know, regulators require each RIA to review and improve their compliance program on a continuous basis. These efforts must be documented at least annually in the form of an "Annual CCO Report".

To help you with this process, we have produced a white paper called Prevent, Detect, Correct: An Overview of Annual CCO Reports for RIAs. We hope you find this to be a useful tool for better understanding the specific elements of your annual CCO report.

Click here to download the white paper.

If we haven't already and you would like us to upload a copy of a template for you to use as a guide for your annual CCO report, please send an email to:

And we will upload a copy to your Advisor Portal.

Happy Holidays!

The AdvisorAssist Team

Sunday, December 16, 2012

FINRA Guidance on Suitability Rules

FINRA issued Regulatory Notice 12-55 in December 2012 to clarify rules regarding investor suitability for FINRA-member firms and their registered persons.

The notice states, "FINRA Rule 2111 requires, in part, that a broker-dealer or registered representative 'have a reasonable basis to believe that a recommended transaction or investment strategy involving a security or securities is suitable for the customer' based on the customer’s investment profile."

The document contains relevant Q&A regarding the definition of a customer and the scope of this rule.

Regulatory Notice 12-25 titled Additional Guidance on FINRA’s New Suitability Rule - Implementation Date: July 9, 2012 discusses the rule in detail.

AdvisorAssist Analysis:
RIAs must also take suitability serious. This is an increasing deficiency item with the regulators and found through AdvisorAssist client reviews. Documentation and routine check-ins with the client are required.

If you have any questions regarding this topic, please email us at

Texas Advisor's Licensing Revoked for False Statements

A Texas registered investment advisor had its license revoked for providing false information to the regulators in exams and filed documents. Click here for the enforcement action.

AdvisorAssist Analysis
Aside from the obvious, we post this matter to remind our clients that not only willful acts, but omissions can result in similar issues. The securities regulators are here to protect the interests of investors and any omission, poor business practice or conflict that is contrary to client interests will be their focus.

Some common deficiencies we encounter:

  • Failure to maintain Form ADV for changes in your business or personnel
  • Inconsistency in employment, activities and relevant dates on your social media vs. regulatory filings. Did you file a false U4 with the state? Or post a misleading advertisement? Pick your rule violation.
  • Do you maintain accurate financial records? This was the issue at hand with this matter. We know running a business is tough and many small businesses are forced into some level of commingling. That said, you are running a business. Your financial situation must be solid and meticulous. If you can't do it yourself, you need to hire someone.
  • Suitability and documentation. This is not a one-time event and YES, you need to document these efforts. Leverage your CRM system with a few custom fields and let the workflow engine (in most CRMs) help you with these tasks and reminders.
  • Timeliness. If there is a change to your business, practices, fees, personnel, etc., changes must be filed and/or communicated promptly. Usually 30 days is considered the latest date to make such updates/communications.
  • Complete topic-based risk assessments. AdvisorAssist provides all compliance clients with risk assessment questionnaires on the risk management topics and regulations. We encourage you to complete these.
  • Ask questions and show progress. The regulators are not out to get advisors. They are out to protect clients. Continuous improvement and a culture of compliance will be obvious to a regulator (as will the lack thereof).

If you have any questions or concerns regarding your risk management or audit readiness, please contact us at

Friday, December 14, 2012

Massachusetts Sues LPL over Non-Traded REITS

The Massachusetts Securities Division sued LPL FInancial on December 12, 2012 for improper practices over the sale on non-traded REITS.

Here is a link to the complaint.

AdvisorAssist Analysis:
The compliant mostly focuses on three key areas:

  1. When there is a conflicts of interest between the broker(rep) and the Client, disclosure and suitability are critical and must be properly performed and documented. The complaint notes that “non-traded REITS are especially risky through limited redemption programs, high fees and commissions, and internal conflicts of interest.” Further, it questions LPL's supervision stating that although LPL did have “stringent requirements” for the sale of these non-traded REITs, LPL “failed to review properly sales” to ensure they did not represent a material portion of a retail investors assets (10% of assets).
  2. Failure to properly train its supervisory staff with respect to these instruments, including prospectus and suitability requirements.

This complaint points out one key issue that is not just an LPL specific issue. Remote supervision is tough!It is a challenge whether you have a single offsite advisory person or thousands or affiliated personnel. Firms must establish the appropriate controls, workflows and validations. For instance, we believe every firm that has more than one person should have an account approval process. Further, an Investment Committee and notes on security analysis can be very helpful in demonstrating due diligence. Lastly, fiduciary duty and suitability are not one-time events. Firms should enhance their technology (CRM or reporting systems) to make this continuous review manageable.

If you have questions on how to implement these controls, please contact us at

Thursday, December 13, 2012

2013 Renewal Fees - DEADLINE 12/13/12

The 2013 Renewal Fees were due on 12/13/2012 for all firms (RIAs and BDs). If you have not funded your renewal account with the appropriate fees, you must do so promptly.

FINRA notices also make mention of a $100 late fee plus interest. RIAs are not subject to those fees (only FINRA members for FINRA fees). However, you still need to give prompt attention to this matter. The systems close for transactions on the 20th for the year. If you are not paid by the 20th, you risk being terminated by the states.

If you have any questions regarding your fees, please contact us at

Wednesday, December 12, 2012

FINRA Proposes Compensation Disclosure

In FINRA's continued quest for a role in the RIA segment, their 20-member board of governors voted on 12/10/12 to propose a rule that would require a registered representative that switches firms to disclose any compensation, bonus or other incentive received in the recruitment process.

This is important for the fiduciary movement, but is likely to result in continued departures from the brokerage firms. We expect significant pushback from member firms. RIAs must disclose the nature of ANY conflict of interest, including, but not limited to compensation from 3rd parties. However, they do not need to state specific dollar amounts. They are required to state the source and nature of any conflict and how they mitigate such conflict.

Financial Advisor magazine has good coverage on this topic (

We'll continue to keep you apprised on this proposal. Please share any thoughts or questions.

Monday, November 26, 2012

Schapiro resigns from SEC post

Effective December 14, 2012, Mary Shapiro will resign from the SEC. This does not come as any surprise, but the comments and opinions are certainly entertaining.

Elisse Walter has been appointed as Commissioner for the foreseeable future. Interestingly, Ms. Walter’s appointment does not require Congressional approval as she was previously confirmed as a commissioner by the Senate. However, as she has served before, it is likely that her tenure will be short. There is a desire to keep some continuity and Ms. Walter does have a record of similar voting, strategies and opinions as Ms. Shapiro.

Walter is likely to continue the push for FINRA as a self-regulatory organization over RIAs and a uniform fiduciary standard. We view this as the wrong decision for the RIA segment and ultimately for your clients.

AdvisorAssist will continue to monitor the activities in Washington. At this point, we expect the SEC to continue the path of increased exam frequency, visits to newer advisors and check-ups exams.

Friday, November 23, 2012

Retained Associates License

Hang a license?

FINRA recently proposed a new registration category called "Retained Associates" that would allow a currently registered person to retain their license for up to 10 years if they remain with the same firm.

While this would be useful for folks that assume operational roles, it has limited utility to the hybrid RIA, unless the RIA was also the owner of the broker-dealer.

This is also a complete 180 from FINRA's current rules that prevent the "hanging" of a license. In our opinion, this is just another move to help FINRA stay in the game.

We will continue to monitor this proposal and keep you informed.

The AdvisorAssist Team

Thursday, November 15, 2012

Massachusetts State Advisors: Compliance with Bonding Requirements for Advisers with Discretion Over Client Assets

Policy Statement Issued by Massachusetts Securities Division on November 14, 2012

Link -->

The Massachusetts Securities Division (the “Division”) would like to remind advisers that the Code of Massachusetts Regulations at 950 CMR 12.205(5)(a) requires that Massachusetts-registered investment advisers that have discretion over client accounts to be bonded in an amount not less than $10,000.00 by a bonding company qualified to do business in the Commonwealth.1

The Division generally takes the position that, for the purpose of this requirement, discretion means that the adviser has authority to execute buy or sell transactions for a client’s securities portfolio. An adviser can have such authority granted to it through, for example, advisory contracts, powers of attorney, trustee relationships, or an executed limited trading authority.

Advisers, on occasion, have a limited trading authorization form on file with a custodian for the convenience of their clients, but do not buy or sell securities without first authorizing each trade with the client prior to execution. In such cases, the adviser will not be subject to the bonding requirement of 950 CMR 12.205(5)(a) but only if:

  1. the adviser’s contract with the client explicitly states that the adviser does not have trading discretion;
  2. the adviser acquires permission or clears each and every trade prior to and on the same day that the adviser issues the order to buy or sell; and
  3. the adviser documents all such clearances in a written form, such as an e-mail or a log or journal and maintains such documentation for a period of five (5) years from the date of the transaction.
  4. During routine books and records examinations, examiners will be reviewing adviser’s practices to ensure compliance with these requirements.

1 This policy is applicable to Massachusetts advisers that are both registered with and located in Massachusetts. Advisers that maintain their principal office in another state and are registered there are subject to their home state’s books and records rules and bonding requirements.

AdvisorAssist Analysis:
Advisors that ARE located in Massachusetts have this bonding requirement. If you are registered in Massachusetts solely due to having more than 5 clients, you must follow your home state financial requirements and indicate to MA via your ADV1 that you are in compliance with your home state. SEC registered advisors do not have this requirement in MA.

Wednesday, October 31, 2012


On 10/29/12, FINRA made enhancements to the IARD and CRD systems. Changes were mostly enhanced system functionality. The changes that affect RIAs include:

  • "Type ahead" lookup for various lookup fields
  • Layout and form organization
  • Updates to fees and renewal statements
  • Private Fund Advisor updates for renewals
  • State Advisors - New question as to whether you are both an advisor and manager to a trust (ADV1B, Item 2.I.(2)(b) - Pooled Investment Vehicles and Trusts)

ADV1B, Item 2.I.(2)(b) -- Do you or a related person act as investment adviser and a trustee for any trust, or act as a trustee for any trust in which your advisory clients are beneficiaries of the trust? If, yes, please contact AdvisorAssist @ with the details of these relationships.

If you do not have a change to ADV1B, Item 2.I.(2)(b) above, there are no actions required at this time, however, any pending filings on your accounts will need to be deleted and re-created.

SEC Advisors may have received an email regarding the updates (see language below). We do not believe any emails went to State advisors.



TRACKING INFO: Date Generated: 10/31/2012 00:10:12 Firm Sent To: [Firmname/CRD] THIS COMMUNICATION IS INTENDED ONLY FOR THE USE OF THE INDIVIDUAL OR ENTITY TO WHICH IT IS ADDRESSED AND CONTAINS OR MAY CONTAIN INFORMATION THAT IS PRIVILEGED, CONFIDENTIAL OR EXEMPT FROM DISCLOSURE UNDER APPLICABLE LAW. If the reader of this communication is not the intended recipient (or the employee or agent responsible for delivering to the intended recipient), you are hereby notified that any dissemination, distribution, or copying of this communication is strictly prohibited. If you have received this communication in error, please disregard and delete this communication, and do not disseminate or retain any copy of this communication.

Tuesday, October 30, 2012

Risk Assessments Enhancements - Feedback and Testers Needed

AdvisorAssist has been continually enhancing its topic-based risk assessments. We are in the process of developing an application to further enhance the experience and effectiveness of these tools. First off, we would love your feedback and suggestions to integrate into our plans. Please email any suggestions to If your firm would like to join your colleagues in testing this new application as part of our pre-release, please let us know. Thank you. The AdvisorAssist Team.

Monday, October 29, 2012

Hurricane Sandy: AdvisorAssist BCP Plan

Clients, Partners and Friends:

As many of you along the eastern side of the country are preparing to protect your families and your livelihood, the AdvisorAssist team has you in our thoughts.

AdvisorAssist is prepared to support you during this tough period. AdvisorAssist operates on a fully redundant and secure cloud environment, with offices in multiple states.

If you have any business continuity matters and need support, please contact us at:

Advisor Support Line: 617-800-0388, Option 2

If possible, please reflect on your business continuity plan as you endure this process. We welcome follow-up meetings to discuss and enhance your BCP plan.

Thank you.

The AdvisorAssist Team

Monday, October 22, 2012

SEC Issues Notice of Intent to Cancel Registrations of 293 Investment Advisers

SEC Issues Notice of Intent to Cancel Registrations of 293 Investment Advisers

Summary of SEC Release No. IA-3490; October 19, 2012

On July 21, 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) was signed into law requiring mid-sized advisers (those between $25 million and $90 million) to move from SEC to state registration by June 28, 2012. As of the date of this report, more than 2,300 mid-sized advisers – those managing less than $100 million of assets – have made the transition to state regulation, but there are 293 that have yet to transition.

On October 19, 2012, the SEC issued Release No. IA-3490 identifying 293 advisers who may no longer be eligible for registration with the SEC because they manage less than $90 million or have failed to comply with other requirements.

Advisers identified in the notice have until December 17, 2012 to withdraw their SEC registration by filing a partial Form ADV-W, or inform the Commission staff that they have should remain eligible for registration with the SEC. After that date, the Commission may issue an order cancelling the registration of advisers who have not filed an amendment, withdrawn from registration, or requested a hearing.

Advisors receiving such a letter should work with their compliance consultants and their state regulators to promptly resolve any open registrations. If you have a registration in process with the state(s), we do suggest contacting the SEC in writing to demonstrate that the Advisor is making a good faith effort to comply.

If you have any questions regarding this compliance alert, please contact us at or call 617-800-0388.

Tuesday, September 25, 2012

Massachusetts seeks to deny registration to adviser

If you have not heard AdvisorAssist preach the importance of accurate filings in the past, here's the reason.

Dan Jameison of put out a great article today about an RIA firm that allegedly has mis-calculated assets under management. The firm was setting AUM at $25 million over the past several years (the former SEC minimum threshold). The assets were not accurate and the state believed that they included assets under their broker-dealer affiliation, which are not assets of the RIA.

The Massachusetts Securities Division has denied registration to this RIA firm and they no longer qualify for SEC registration. Effectively, they are out of business.

Read the full story at

AdvisorAssist has created a blog post that discusses the calculation of Regulatory Assets Under Management at

As always, please contact us with any questions regarding your firm.

The AdvisorAssist Team

NJ to Review ADV Amendments

On October 1, 2012, the Examinations Unit of the Bureau will commence an initiative to review amendments to the Form ADV Part 2 firm brochure (“Brochure”) submitted to the IARD system by an investment adviser registered with the Bureau (“IA”).

Upon review of an amended Brochure, the Bureau may notify you by email of any deficiencies in your amended Brochure, which you will be expected to address promptly. Any deficiency that is not appropriately and timely resolved may result in further action. You are reminded that your Brochure must be in compliance with the New Jersey Uniform Securities Law.

As an AdvisorAssist Compliance Client, we were make all appropriate updates to your ADV1, ADV2A and ADV2B.

If you receive a notice from New Jersey or any other state, please post a copy of the letter into your Advisor Portal and notify AdvisorAssist at

The AdvisorAssist Team

Friday, September 21, 2012

Webinar: Enter Into Social Media Marketing With Confidence

Webinar: Enter Into Social Media Marketing With Confidence

Date: September 21, 2012
Slides and Replay:

social media pool is open. While advisors should not be afraid to test the water, they must prepared before diving in.

Chris Winn of AdvisorAssist will guide you through the current regulatory landscape and strategies for starting out and managing your social media presence.

At this session, you’ll learn the latest about:

  • SEC, state and FINRA social media rules
  • Formulating a social media strategy
  • Best practices in implementing a social media policy
  • Technology for efficiency
  • Specific areas of interest to regulators
  • Common mistakes to avoid

Speaker Chris Winn is founder and managing principal AdvisorAssist, a management consulting firm serving advisors, and he has over 19 years of experience in regulatory compliance for RIAs, reps, and B/Ds.

Saturday, September 1, 2012

CFP Board Increasing CE Requirements

The CFP Board proposed new rules on August 17, 2012 to increase existing continued education ("CE") requirements for CFP certificants. This is really the first major change since it the organization's inception. The proposal is a result of a comprehensive review of the current CE requirements.

The Board issued a 45-day public comment period ending September 30, 2012 and said that any amendment to the rule would be decided in November 2012. If you are a CFP or planning to become one, you can submit your feedback to or by regular mail to:

CFP Board
c/o Michele M. Warholic, Esq.
Managing Director, Education, Examinations and Talent
1425 K St., NW #500, Washington, DC 20005

Summary of rule changes:

  • Increase total CE hours required each 2 year period renewal period from 30 to 40 hours, a 33% increase.
  • Granting CE credit for practice management programs and/or pro bono activities, up to 4 hours (total combined) per renewal period. The Board finally supports practice management. [AdvisorAssist opinion - how can you be compliant if you have ineffective processes - always an issue we fight with CFP for our events!).
  • Included practice management programs will include those focused on the planning, development and management of a CFP professional’s business operations, office management, business model design, budgeting processes and leadership. Any pro bono activities must be supervised by a registered CE sponsor organization and will be accepted for one hour CE credit per 4 hours pro bono service.
  • Increasing the ethics CE requirement from 2 hours to 4 hours (100%), which includes a mandatory CFP Board-produced ethics program (2 hours) plus 2 hours of ethics programming.
  • Expanding the professional activities that qualify for CE credit from the current teaching and authorship activities to additional ones such as study groups and research.
  • Implementing a “50% cap rule,” which limits CE credit for any single topic area or professional activity to 50% of total required CE hours. One may only receive up to 20 hours of the 40 required in any one of the approved topic areas for CE, such as investments or insurance. However, conferences that comprise individual educational sessions would not be subject to the cap. [AdvisorAssist suggests you may want to comment here. You know what conferences you find most valuable.]
  • Eliminating CE credit for completing professional licenses and designation exams.

You can read the full text of the proposal at

Wednesday, August 1, 2012

No FINRA (for now)

For the moment, FINRA as an Self Regulatory Agency is off the table. 

H.R. 4624 (the “Investment Adviser Oversight Act of 2012”), which would subject RIA firms to the absurd rulemaking, inspection and enforcement authority by FINRA, is off the table of this session of Congress.

Not a time for celebrating...

FINRA and its advocates have taken a step back to come up with a better argument and hope the SEC makes no progress on funding, increased exam coverage and credibility.

Expect to see this come back in the next session!

As a lesser of two evils, the discussion on RIA Exam Fees is back in circulation. On July 25, 2012, Rep. Maxine Waters (D-Calif.) proposed a bill that would would permit the SEC to impose user fees on SEC-registered investment advisors (note SEC only) that will be used solely to enhancing the SEC's examination program.

We see this as a likely reality that more fees are in store for advisors. This will also pave the way for states to implement exam fees.

Sadly, we have yet to see a bill that suggests the SEC actually review its methodology. 

That's politics. We'll keep you apprised of the developments.

Thank you.
- The AdvisorAssist Team

Tuesday, April 10, 2012

Risk Assessments: Why and How?


Rule 206(4)-7 of the Investment Advisers Act of 1940 requires that registered investment advisers implement a compliance program that is reasonably designed to prevent violations of the securities rules and regulations. Risk assessments can assist you in evaluating your existing compliance program’s effectiveness and ensure it is designed appropriately, given the way you run your RIA.


Identify all risk areas

Begin by reviewing all of your business activities across your firm. Think about your firm’s business model, who your clients are, the role of your employees, and the products and services you offer. Expand your thought process to include conflicts of interest, potential regulatory violations, and potential breach of contract and client mandates. Review findings from recent SEC or State inspections and include any deficiencies that were identified.

Assign a Rating to Potential Risks

Once you have gathered all of your business activities and potential risk areas you must assign a rating to each. Many advisors utilize something simple, like low, medium, and high as risk categories. When assigning a rating consider the regulatory risks, financial risks, and operational risk of each item. Consider the probability of having an issue in the particular business activity, as well as the impact an issue would have on your organization.

Map each risk to your policies and procedures

For each risk identified above, ensure the proper policy and procedure have been implemented. Higher risk areas often require additional internal controls and more extensive policies and procedures.

Perform annual review

Your policies and procedures are meant to be updated on an ongoing basis as needed. At least annually the Advisor should review all business activities and update the risk assessment and policies and procedures.


Each week I will post a risk assessment on a specific business area and discuss some of the specific applicable risks.

Tuesday, April 3, 2012

ADV Amendment Filed – What’s Next?

Here are some next steps now that you’ve filed your annual amendment. Below are questions our consultants at AdvisorAssist are frequently asked:

What am I required to provide to Clients?

There are two different routes advisors can take when it comes to delivering their ADV Part 2. First and foremost, regardless of the path you chose for your ADV Part 2, you must deliver a copy of your privacy policy annually. For the ADV Part 2:
  • Option 1: If there have been material changes to your business the material changes must be described in ADV Part 2, Item 2. Under the current rules, you could provide your clients with a summary of these material changes and an offer to deliver the entire ADV Part 2. In your offer you must include instructions on how clients can obtain a copy from you.
  • Option 2: Advisors can also opt to deliver a full copy of the entire ADV Part 2. In this instance Item 2 - Material Changes still needs to be updated.
Generally, AdvisorAssist recommends that advisors include a cover letter explaining what is being provided to clients and why. For an example letter, please contact us.

May I email this information to Clients?

You may attach the information described above as pdf files in an email to clients. Sending an email with a link to the documents does not constitute delivery. You should only email this information to clients if you generally use email as a means of communication with that client.

When must I deliver the information?

The information described above must be delivered within 120 days of your fiscal year end. Generally the 120 day mark is May 1st, however, since 2012 is a Leap Year, the 120th day is actually April 30th.

What constitutes a material change?

The best way to determine if a change is material is to consult an independent resource who can assist you in making an objective determination. Material changes to your Form ADV Part 2A may include changes to your services, fees, advisory personnel, financial industry affiliations, disciplinary events and financial challenges of the firm or principals, such as a bankruptcy.

Besides my annual amendment, what other times must I update my ADV Part 2?

Investment advisors are required to update their Form ADV Part 2A promptly when the information in the brochure is materially inaccurate. Remember to file your updated Form ADV Part 2A on the IARD system.

Tuesday, January 3, 2012

Calculating Regulatory Assets Under Management

Advisors must quantify the amount of assets they manage. This year Advisors must calculate Regulatory Assets Under Management, which is slightly different from other asset calculations you are used to. Here are the key components to the calculation:

Securities Portfolio

Include the securities portfolios for which you provide continuous and regular supervisory or management services as of December 31, 2011.

An account is a securities portfolio if at least 50% of the total value of the account consists of securities. For purposes of this 50% test, you may treat cash and cash equivalents (i.e., bank deposits, certificates of deposit, bankers acceptances, and similar bank instruments) as securities.

You must include securities portfolios that are:

  1. Your family or proprietary accounts;
  2. Accounts for which you receive no compensation for your services; and
  3. Accounts of clients who are not United States persons.

For purposes of this definition, treat all of the assets of a private fund as a securities portfolio. For accounts of private funds, include in the securities portfolio any uncalled commitment pursuant to which a person is obligated to acquire an interest in, or make a capital contribution to, the private fund.

Value of Portfolio

Include the entire value of each securities portfolio for which you provide continuous and regular supervisory or management services.

If you provide continuous and regular supervisory or management services for only a portion of a securities portfolio, include as regulatory assets under management only that portion of the securities portfolio for which you provide such services.

  • Under management by another person; or
  • That consists of real estate or businesses whose operations you “manage” on behalf of a client but not as an investment.

Now that we’ve discussed the two key components, (i) Identifying the Assets; and (ii) Quantifying the Assets - Here’s the How!!

(i) Determine which assets constitute Continuous and Regular Supervisory or Management Services

You provide continuous and regular supervisory or management services with respect to an account if:

  • You have discretionary authority over and provide ongoing supervisory or management services with respect to the account; or
  • You do not have discretionary authority over the account, but you have ongoing responsibility to select or make recommendations, based upon the needs of the client, as to specific securities or other investments the account may purchase or sell and, if such recommendations are accepted by the client, you are responsible for arranging or effecting the purchase or sale.

You should consider the following factors in evaluating whether you provide continuous and regular supervisory or management services to an account.

  1. The Advisory Contract. If you agree in an advisory contract to provide ongoing management services, this suggests that you provide these services for the account. Other provisions in the contract, or your actual management practices, however, may suggest otherwise.
  2. Compensation. If you are compensated based on the average value of the client’s assets you manage over a specified period of time that suggests that you provide continuous and regular supervisory or management services for the account. If you receive compensation in a manner similar to either of the following, that suggests you do not provide continuous and regular supervisory or management services for the account:
  • You are compensated based upon the time spent with a client during a client visit; or
  • You are paid a retainer based on a percentage of assets covered by a financial plan.
  1. Management practices. The extent to which you actively manage assets or provide advice bears on whether the services you provide are continuous and regular supervisory or management services. The fact that you make infrequent trades (e.g., based on a “buy and hold” strategy) does not mean your services are not “continuous and regular.”

You should consider the following examples in evaluating whether you provide continuous and regular supervisory or management services to an account.Examples of providing continuous and regular supervision:

  1. Have discretionary authority to allocate client assets among various mutual funds;
  2. Do not have discretionary authority, but provide the same allocation services, and satisfy the criteria set forth in Instruction 5.b.(3);
  3. Allocate assets among other managers (a “manager of managers”), but only if you have discretionary authority to hire and fire managers and reallocate assets among them; or
  4. You are a broker-dealer and treat the account as a brokerage account, but only if you have discretionary authority over the account.

Examples of NOT providing continuous and regular supervision:

  1. Provide market timing recommendations (i.e., to buy or sell), but have no ongoing management responsibilities;
  2. Provide only impersonal investment advice (e.g., market newsletters);
  3. Make an initial asset allocation, without continuous and regular monitoring and reallocation; or
  4. Provide advice on an intermittent or periodic basis (such as upon client request, in response to a market event, or on a specific date (e.g., the account is reviewed and adjusted quarterly).

(ii) Determine the value of those assets identified above:

Determine your regulatory assets under management based on the current market value of the assets as determined within 90 days prior to the date of filing this Form ADV. Determine market value using the same method you used to report account values to clients or to calculate fees for investment advisory services.

In the case of a private fund, determine the current market value (or fair value) of the private fund’s assets and the contractual amount of any uncalled commitment pursuant to which a person is obligated to acquire an interest in, or make a capital contribution to, the private fund.


You should consider the following examples in calculating your value of Regulatory Assets Under Management.

The client's portfolio consists of the following:

  • $6,000,000 -- stocks and bonds
  • $1,000,000 -- cash and cash equivalents
  • $3,000,000 -- non-securities (collectibles, commodities, real estate, etc.)
  • $10,000,000 -- Total Assets

Let’s run through some Key Questions:

  1. First, is the account a securities portfolio?
  2. The account is a securities portfolio because securities as well as cash and cash equivalents (which you have chosen to include as securities) ($6,000,000 + $1,000,000 = $7,000,000) comprise at least 50% of the value of the account.
  3. Second, does the account receive continuous and regular supervisory or management services? The entire account is managed on a discretionary basis and is provided ongoing supervisory and management services, and therefore receives continuous and regular supervisory or management services.
  4. Third, what is the entire value of the account? The entire value of the account ($10,000,000) is included in the calculation of the adviser's total regulatory assets under management.

If you have any questions on these calculations, please contact us at