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Impact of Dodd-Frank on Investment Advisers


Notice Regarding the Upcoming Switch of Regulatory Oversight of Investment Advisers from the Securities and Exchange Commission (SEC) to the State of Minnesota

Federal Regulations that became effective on July 21, 2011, has resulted in significant changes to the regulation and oversight of investment advisers. These changes are designed to assist and protect investors while providing greater transparency and stability to financial markets.

Among these changes, the Dodd-Frank Act requires states to regulate investment advisers with assets under management up to $100 million. Oversight of investment advisers has always been a partnership between state and federal regulators.  However, the Dodd-Frank Act will increase the state’s authority in the area of investment adviser regulation by raising the threshold from $25 million to $100 million in assets under management.

Generally, this change affects investment advisers currently registered with the Securities and Exchange Commission (SEC) having between $25 million and $100 million in assets under management.  Investment advisers that meet this criterion must switch from SEC regulatory authority to the Minnesota Department of Commerce.  This “switch” must be completed no later than June 28, 2012.

Minnesota is committed to assist investment advisers in fulfilling the required switch in an efficient and timely fashion consistent with Minnesota’s securities laws and regulations – regulations designed support the integrity of the marketplace protect the investing public. The following is a synopsis of the key components of Minnesota’s Program including a timeline.

Minnesota’s Investment Adviser Program

  • The Program is designed to not overburden the investment adviser by respecting the adviser’s time and the adviser’s responsibilities to their clients.

  • The Program recognizes that the advisers who will be switching to state oversight have been regulated by the SEC and that there are differences between state and federal regulation. 

  • By participating in the Program, the adviser is committing to work with the Minnesota Department of Commerce both before and after the approval date to ensure compliance with Minnesota’s securities laws and regulations.

  • Participation in the Program will ensure the adviser’s timely approval with the Minnesota Department of Commerce.

  • There will be no fees associated or assessed by the Department in connection with the Program beyond those fees that have been historically charged for registrations and renewals.

Timeline  

  • January 1-March 30, 2012
    Advisers switch their Annual Updating Amendment through the Investment Adviser Registration Depository (IARD) system.  Through this Amendment, advisers will notify the SEC that they are no longer eligible to remain with the SEC and they will register with the State of Minnesota. During this same time period, advisers will send the Minnesota Department of Commerce the additional required registration documents as set forth below.

  • January 1-June 28, 2012
    The Minnesota Department of Commerce will approve the advisers and will notify them whether they are approved and are eligible to withdraw from the SEC registration. After approval, the advisers participating in the switch will file a partial Form ADV-W to terminate their registration with the SEC.

  • June 28, 2012
    Switch Program Completed

  • June 28, 2012
    Investment Adviser Examination Program Roll-Out Begins
      For a detailed explanation of the examination process, go to:
      Information Concerning the Examination Process (.pdf)
      Supplemental Information - Data Practices (.pdf) 

    If you have questions about the federal regulations changes, please visit the Frequently Asked Questions section prior to contacting the Department.