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News May 30, 2011 Issue

With Registration Compliance Likely Delayed, What Happens To Your IARD Accounts?

Do they expire if unused for too long? If the accounts expire, do advisers lose their deposited funds?

Private fund advisers that were anticipating a July 21 registration deadline have been busy establishing their Form ADV filing accounts through the Investment Adviser Registration Depository (IARD) system. Without the user (filing) and daily (funding) accounts opened and the appropriate funds deposited and available, adviser registration and notice filings cannot be accepted and processed.

IARD filer accounts can take up to three weeks to establish and fund. Advisers don’t want to blow their registration deadline on technical grounds because their accounts weren’t ready.

Now that the SEC expects to consider delaying compliance with the registration requirement for private fund advisers until the first quarter of 2012, what will happen to IARD accounts that are established, but may not be used for a period of time?

What if further rulemaking leads you and your savvy counsel to conclude that you are not required to file at all, but your IARD accounts are up and running?

We asked the IARD folks for some guidance.

IARD support said that an IARD user account that has not filed a Form ADV with the SEC or one or more states remains active for one year after it is established. After twelve months, unused accounts are deactivated to maintain the security of the IARD system.

After ten months of inactivity, an email notice is typically sent to the adviser indicating that access to IARD will be terminated one year after the establishment of the accounts.  

The twelve-month period is rolling from the establishment of the accounts, and reaching the end of a calendar year does not trigger account deactivation. IARD filer accounts remain active after an initial Form ADV filing as long as the adviser has not filed a Form ADV-W withdrawal form.

Advisers use Form ADV-W to withdraw an effective registration or a registration application prior to its effectiveness.

Advisers with established but unused filer accounts can request a three-month extension beyond the twelve-month inactivity limit through FINRA (webiard@finra.org or 240-386-4848), which manages the IARD system. Advisers can request extensions for periods longer than three months that may be accommodated depending upon the facts and circumstances.  

Any funds deposited in a filer’s IARD "daily" account to pay fees are returned to the adviser after the accounts are deactivated either due to inactivity or the filing of a Form ADV-W.

Advisers seeking to close filing accounts and retrieve funds in advance of the one-year inactive period can make those requests through FINRA (webiard@finra.org or 240-386-4848). Also, if a daily account has been overfunded, a return of the overage can also be requested in the same manner.

"We have strict accounting of filers’ deposits to IARD accounts," said IARD coordinator Keith Kanyan. "FINRA will send the funding as ‘lost property’ to the state the adviser was located in if attempt to return the funding is not successful after the adviser withdraws [an application for] registration or withdraws their registration."