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More than 1,500 advisers registered with SEC since financial reform law

A total of 1,504 advisers to hedge funds and other private funds have registered with the agency since the Dodd-Frank Wall Street Reform and Consumer Protection Act mandated such registration.

While some private fund advisers previously registered with the SEC voluntarily, mandatory registration has given the SEC its first comprehensive look at advisers to these types of funds. Including the 2,557 private fund advisers who had registered previously, a total of 4,061 advisers to one or more private funds are now registered with the SEC.

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

A total of 11,002 investment advisers now are SEC-registered, with 37 per cent advising hedge funds and other private funds. Assets under management at SEC-registered advisers has risen about USD5.7trn, or 13 per cent, even though the number of advisers fell about 15 per cent as the Dodd-Frank Act required mid-sized advisers to move from federal to state oversight.

"Registration of private fund advisers requires these important market participants to comply with the Advisers Act and SEC rules and arms the SEC with the authority to examine their operations,” says Norm Champ, director of the SEC’s division of investment management.  “Advisers are not just required to file a registration form, they also must take steps to ensure they are acting as fiduciaries, including monitoring their activities for conflicts of interest that can harm investors."

Last week, the SEC's National Examination Program launched an initiative to conduct focused, risk-based examinations of newly registered private fund advisers over the next two years.

In addition, the Dodd-Frank Act required mid-sized advisers to move from federal to state registration by June 28. To date, more than 2,300 mid-sized advisers – those managing less than USD100m of assets – have made the transition to state regulation.

In an effort to finalise the transition, the Commission has issued a notice identifying 293 advisers who may no longer be eligible for registration with the SEC because they manage less than USD100m or have failed to comply with other SEC requirements. The Commission undertook this effort with extensive coordination and consultation with the state securities authorities.

“Working together throughout the switch, state securities regulators and the SEC have demonstrated the effectiveness and efficiency of government regulation of investment advisers,” says 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.”

Advisers identified in the notice have until 17 December to withdraw their SEC registration, or inform the Commission staff that they should remain eligible for registration with the SEC. After that date, the Commission may issue an order cancelling the registration of advisers who have not filed an amendment, withdrawn from registration, or requested a hearing.
 

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