Government shutdown halts SEC processing of new adviser registrations

'Are you going to open your doors without approval from the SEC?'

Jan 10, 2019 @ 2:41 pm

By Mark Schoeff Jr.

Financial advisers whose New Year's resolution was to open a registered investment advisory firm are in limbo thanks to the government shutdown.

The partial closure of the federal government has curtailed most Securities and Exchange Commission work, including exams and the processing of new or pending investment adviser applications, according to the agency's shutdown operations plan.

Normally, the SEC has 45 days from time that an adviser files a Form ADVwith the agency to either approve the application or start a proceeding to review it more in depth. But during the shutdown, which began Dec. 22, new applications are not being approved or considered.

"Are you going to open your doors tomorrow without approval from the SEC?" said David Tittsworth, counsel at Ropes & Gray. "I don't know how people are going to assess that risk. It's confusing. It's frustrating. You shouldn't have to deal with these issues."

President Donald J. Trump and congressional Democrats don't appear close to resolving their differences over funding a border wall between the United States and Mexico, which caused a lapse in appropriations for the SEC and other government agencies.

As the shutdown grinds on, some fledgling RIAs are taking other steps to launch their businesses, said Christopher DiTata, vice president and general counsel at RIA in a Box, a compliance consulting firm.

Mr. DiTata is advising his clients to concentrate on establishing custodial relationships, doing due diligence on vendors and setting up office operations while waiting for the SEC to reopen.

So far, the RIAs-in-waiting are maintaining a good attitude.

"We've seen these new SEC applicants be relatively understanding of the situation," Mr. DiTata said.

Under shutdown operations, only about 300 of the SEC's 4,436 employees are working. The Investment Adviser Registration Depository is still operating because it's run by a contractor. The IARD is accepting annual amendments to Form ADV, Form ADV-W and Form ADV-E filings.

It's difficult to know how many newly filed registrations are piling up. The SEC has not indicated how long it will take to process them when it's back in business.

"Every day that goes by that the shutdown continues, the backlog grows," Mr. Tittsworth said.

0
Comments

What do you think?

View comments

Recommended for you

Featured video

INTV

Financial therapy fills the gap between money and emotions

Most clients have complicated relationships with their finances, according to Rick Kahler, founder of Kahler Financial Group, and financial advisers can help.

Latest news & opinion

Former adviser gave college football players money to win business later

Louis 'Marty' Blazer said he gave $10,000 to a player with hopes he could represent him when he turned pro.

Finra suspends former star LPL rep who borrowed client cash

Regulator says James E. 'Jeb' Bashaw borrowed $200,000 from a client in 2013 without telling LPL.

Higher tax bills following reform surprise clients

Lower withholding and the loss of state and local deductions throw many for loop.

Centerbridge said to be in talks to buy Advisor Group

Advisor Group's independent broker-dealer network in the U.S. has more than 7,000 advisers.

The drawback of Richard Thaler's 401(k)-Social Security idea? Social Security itself

Observers think Congress would need to address Social Security's funding levels and offer enhanced protections for the concept to work

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print