SEC to HF Advisers: You’re in or You’re Out

Time’s up for private fund advisories to register with the SEC. 

(October 23, 2012) – The US Securities and Exchange Commission (SEC) has enacted the latest in a string of mandates to increase transparency and accountability in the private advisory and consultant industry. 

The commission is pushing through the final stages of registering private fund advisors. More than 1,500 have registered since the Dodd-Frank Act made it mandatory. (As of last week, they will have to sit SEC exams, as well.)

“Prior to the Dodd-Frank Act, regulators only saw a slice of the pie but didn’t know how big the pie even was,” said Mary Schapiro, chairman of the SEC, in a statement. “The law enables regulators to better protect investors by providing a more comprehensive view of who’s out there and what they’re doing.” 

The new regulations give the SEC a more focused look at the group it really wants to keep an eye on: advisers to hedge funds and other private funds who manage more than $100 million. Advisories below that threshold have been moved out of the SEC’s oversight to state regulators. 

“Working together throughout the switch, state securities regulators and the SEC have demonstrated the effectiveness and efficiency of government regulation of investment advisers,” said A. Heath Abshure, Arkansas’ securities commissioner and president of the North American Securities Administrators Association. “The vast majority of switching advisers have made a smooth transition to state regulation and we are committed to working with those firms that continue to diligently pursue their state investment adviser registrations.” 

To date, more than 2,300 of them have made the transition—and the SEC is pushing the stragglers out the door. 

A notice went out today identifying 293 advisories that do not appear to meet the $100 million asset threshold and have failed switch regulators. The headline: “Notice Of Intention To Cancel Registrations Of Certain Investment Advisers.” In the document, the SEC published a list of all 293 firms, many of which serve institutional clients.