NEW YORK, NY--(Marketwire - August 2, 2010) - The SEC has adopted new rules (http://www.sec.gov/rules/final/2010/ia-3060.pdf ) that significantly impact all SEC registered RIAs. These new rules will most likely be adopted by all state securities boards in the near future, thereby rewriting the disclosure requirements for all RIAs in the coming months. The new rules have been reviewed by RIA In A Box (www.riainabox.com), a consulting business aimed at registration and ongoing compliance for registered investment advisory firms at both the state and SEC levels. Focusing on how RIAs disclose information to clients regarding services, fees, liabilities, conflicts of interest, and disciplinary history, the new rules are a complete departure from the old ADV Part 2 that had been in use for decades. The SEC estimates the brochure will take between 15 and 60 hours to complete and cost advisory firms using outside consultants between $3000 and $5000 to create.
"This new ADV Part 2 is going to be completely different from anything RIAs have ever had to do before and the SEC itself estimates it will take many hours to complete –- something which adds tremendously to an RIA's registration burden,¿ said Zachary Gronich, CEO of RIA In A Box. "Though the new rules for the ADV Part 2 now pertain only to the 11,500 RIAs under SEC jurisdiction, from the conversations I have had with several different state officials, it is extremely likely that the states will also adopt the brochure requirement. In the coming year, I expect to see a huge bottleneck in the annual registration process as every RIA in the country will now have to rewrite the document that is at the heart of their business."
The ADV Part 2 brochure, outlined in the 174-page SEC requirements document, must include two sub-parts. Part 1 includes 18 different disclosures about the advisory firm while the second part includes information about each individual working at the firm who provides advice to clients. The SEC directions specify that the brochures must be written in plain English, in the active voice and use short sentences. The SEC expects most RIAs to retain outside compliance counsel to meet the new requirements.
Other key information required in the new brochure includes:
- the amount of client assets under management,
- disclosure of the risk of loss,
- the fee schedule including other expenses and costs such as transaction costs and fund expenses,
- conflicts of interest that may arise from sales of certain investments or the outside business activities of its executive officers and representatives, and
- legal or disciplinary events of representatives and management that are material to the financial business.
"Now RIAs must write a full explanation of all aspects of their businesses, which can be very helpful for their clients, but creating this new ADV Part 2 could be overwhelming for many RIAs," said Gronich. "The SEC itself estimates the task will take from 15 to 60 hours of work. It will be complicated and is a substantial time investment. RIAs, like any other business, prefer to spend time working with clients rather than on administrative overhead."
RIA In A Box is prepared to write the new ADV Part 2 brochures for RIAs using the principles it has followed for its registration business -- streamlining the process for the RIA so time commitments are kept to a minimum. "We will create these brochures quickly, efficiently, and professionally, using a format that will keep the RIAs' time commitment to one hour or less," said Gronich. "With our approach we are going to keep costs to less than half the SEC estimates."
RIA In A Box has programs for creating the new ADV Part 2 brochures based on the size of the RIA firm. These changes are due by the end of the 2011 renewal period, which starts January 1, 2011. The RIAs that get these changes done now can avoid what is sure to turn into a growing backlog in the coming months. For more information, visit www.riainabox.com.
About RIA In A Box
RIA In A Box is a consulting business aimed at registration and ongoing compliance for registered investment advisory firms at both the state and SEC levels. Since its founding by Zachary Gronich, PFS, in 2005, RIA IN A BOX has helped over 860 advisory firms get registered quickly and correctly the first time. RIA In A Box works with all 50 states, Washington, DC, and the SEC. The firm is headquartered in Manhattan. For more information, visit www.riainabox.com or call (866) 611-7638.
Contact Information:
Contact:
Erica Zeidenberg
Hot Tomato Marketing
925-631-0553