SEC identifies 'switch' laggards

Midsize advisory firms that haven't moved to state regulation have until Dec. 17

Oct 19, 2012 @ 4:06 pm

By Mark Schoeff Jr.

Nearly 300 midsize investment advisory firms that have failed to transition to state oversight from the Securities and Exchange Commission could lose their registration if they don't act by Dec. 17, the SEC announced Friday.

The agency sent a notice to 293 advisers who are lagging on the so-called “switch” mandated by the Dodd-Frank financial reform law. Under the measure, advisers with less than $100 million in assets under management are to be regulated by states rather than the SEC. About 2,300 firms have made the move.

“Working together throughout the switch, state securities regulators and the SEC have demonstrated the effectiveness and efficiency of government regulation of investment advisers,” A. Heath Abshure, Arkansas' securities commissioner and president of the North American Securities Administrators Association Inc., said in a statement issued by the SEC. “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.”

As midsize advisers move to the states from the SEC, it is taking on 1,504 new advisers to hedge funds and other private funds. A total of 4,061 private advisers are now registered with the agency. The Dodd-Frank law required the private-fund registration so that the SEC could better monitor their activities for potential systemic risk to the financial system.

Overall, 11,002 investment advisers are now registered with the SEC. The agency oversees firms with a total of about $49.5 trillion in assets under management, a 13% increase since Dodd-Frank was signed into law despite a 15% decrease in the number of registered advisers.

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