The Registration and Procedural Process of Investment Advisers

Issued and entered May 24, 2002 by Frank M. Fitzgerald, Commissioner of Financial and Insurance Services 
 

GENERAL BACKGROUND:

In 2000, the National Association of Securities Dealers, Inc. (NASD) created and implemented the Investment Adviser Registration Depository (IARD). This national database utilized by both the industry and the federal/state regulators streamlines the registration process for investment advisers and their representatives. The national system of registration parallels the already established Central Registration Depository (CRD), allowing for a central review, control, and collection of registration fees while also providing substantial economic benefits to the industry.

The National Securities Market Improvement Act of 1996 (NSMIA) provides that investment advisers, with assets under management in excess of $25 million, must register with the Securities and Exchange Commission (SEC) through the IARD. These advisers are currently known as NOTICE FILERS.

Investment advisers, with assets under management of less than $25 million, must register with the states in which they reside as well as with those states in which they effect investment advisory transactions. These advisers are currently known as STATE FILERS. Presently, in Michigan, state filers have the option of submitting their filings directly with the Office of Financial and Insurance Services or through the IARD.

Currently, investment advisers register by completing the federal Uniform Application for Investment Adviser Registration (form ADV) comprised of two parts. Part I of form ADV is operational, while Part II is still in the developmental stage.

The Office of Financial and Insurance Services has given careful consideration to the IARD system and has determined that in order to achieve optimum benefit and economy, it is in the interest of the residents of this state to require that all investment advisers doing business in this state (Notice Filers and State Filers) file Part I of Form ADV and pay the required fees to the IARD effective December 1, 2002.

Currently, Michigan does not individually register the employees of registered investment advisers.

ACTION OR INTERPRETATION:

In order to avoid any confusion or misunderstanding as to the effectiveness of an investment adviser's notice filing or registration, the Office of Financial and Insurance Services has adopted the following policy:

Sections 201(d), 202(c) and 202a(c) of the Michigan Uniform Securities Act, 265 PA 1964, as amended, MCL 451.601(d), 451.602(c), 451.602a(c) provide that a registration is effective upon order of the administrator; filing of an annual report; and payment of required fees. The following procedural clarification will take effect December 1, 2002.

a) Notice filers are to submit initial and annual renewal of notice filing with this state only through the IARD. Payment of all required fees must be done through the IARD. The state will not accept direct payments of investment advisory fees unless directed by the NASD and with the approval of the administrator.

b) State filers are to submit initial applications by filing Part I of form ADV and paying the required initial investment advisory fees through the IARD. Part II of form ADV, an accrual basis balance sheet dated within 45 days of date of submittal, a copy of the investment advisory contract, and the Michigan Supplemental Application Form must be submitted directly to:

Office of Financial and Insurance Services
Post Office Box 30220
Lansing, MI 48909-8201

c) State filers are to submit annual renewal directly through the IARD.

AUTHORITY:

Section 202(b) Michigan Uniform Securities Act, 265 PA 1964, as amended, MCL 451.602(b).

Any questions regarding this bulletin should be directed to:
Office of Financial and Insurance Services
Licensing Division
611 West Ottawa Street
P.O. Box 30220
Lansing, MI 48909-7720

Phone: (517) 241-6350
Toll Free: (877) 999-6442