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News January 30, 2012 Issue

OCIE Says It’s Ready for the Incoming Wave of Adviser Registration Applications

We know the de facto deadline for private fund advisers to file their registration applications.

February 14.

We know the goal.

Effective registration by March 30.

But what about the process? How will it all work, and what can advisers expect?

Private fund adviser registrations, like all adviser registrations, are processed by the SEC’s Office of Compliance, Inspections, and Examinations (OCIE) in its Registrations Branch. The Registrations Branch is housed in OCIE’s Office of Chief Counsel.

Although a significant number of registration applications are expected to be filed within the next two weeks, OCIE says it is ready, and isn’t anticipating a need for extraordinary measures or assistance to process them.

Business as usual.

Sources within OCIE who requested anonymity indicated that the Registrations Branch currently reviews about 50,000 filings every year, including applications for registration and a wide variety of amendments, from annual updates to material change amendments. Even a concentrated inflow of applications, estimated currently to be in a range anywhere from 800 to 2,000, still would not represent a significant uptick in the workload of the branch.

The sources indicated that OCIE expects to be able to review all the private fund adviser applications within the 45-day period, and that individual applications often do not require a full 45 days to review.

Delayed effectiveness can be requested.

The staff encouraged advisers not to wait until February 14 to file. Applications can be filed any time in advance of the 45-day window, and a number have already been received. If an adviser for any reason wants to delay the effectiveness of its application (not beyond March 30 for registering private fund advisers), there is a process for that as well.

After submitting the application through the Investment Adviser Registration Depository (IARD) system, advisers that want to delay the effectiveness of their registration need only follow these simple steps:

  • Contact the Registrations Branch (202-551-7250) and request the name and contact information for the examiner assigned to the application.
  • Submit an email request for the delay directly to the examiner, who will then process the request along with the application.

The staff reminded filers that the Registrations Branch does not answer substantive questions about how to respond to the items included in Form ADV. Advisers must contact the Division of Investment Management with questions about Form ADV. The SEC’s website notes that "Broker-Dealers, Investment Advisers, Transfer Agents, and Municipal or Government Securities Dealers that require assistance in registering with the Commission or amending a registration or need assistance regarding reporting requirements should contact the Registrations Branch at (202) 551-7250."

Standard procedures for registration applications.

The Registrations Branch expects for the most part that it will be following standard procedures.

That means that when an application for registration comes in, it will be reviewed primarily for four things:

  • Completeness of the application – that is, that all of the information required is included, and any attachments that are indicated or required are appropriately appended to the application;
  • Consistency of the application – for example, if the applicant says it is a certain type of corporation or partnership, that response can affect other answers and the staff looks for consistency in that regard;
  • Review for items answered in the ‘wrong’ way – simple errors of first-time filing, for example, but that may require follow-up with the applicant; and
  • A check of personnel and entities listed in the application using internal SEC databases. The check serves to confirm disclosures as well as check the status of any past, present, or pending actions against firm personnel.

No mass orders.

Every adviser requires an individual order declaring their registration effective. The staff said that no "mass" order will be issued that would cover multiple applicants.

Risk assessment remains a priority.

Advisers should be aware that, while the staff anticipates the smooth processing of applications, application review is in OCIE for a reason. Should information regarding an applicant raise the SEC’s interest, OCIE can share that information immediately with the examination group responsible for the jurisdiction in which the adviser resides. OCIE also uses Form ADV information for risk assessment purposes and to fine-tune its risk assessment analytics.

Newly registering advisers with unusual or riskier business models might find themselves further up in the queue for examination under the SEC’s risk-based allocation of resources. Not only because the SEC has an interest in ensuring appropriate oversight, but also because the staff will be learning more about private fund management along the way.