Advisers Charged with Falsely Claiming Wyoming Home to Qualify for SEC Registration
The SEC fined and censured two investment advisers and charged a third with falsely claiming a Wyoming principal place of business in order to register with the SEC even though they did not have $100 Million in assets under management. Following amendments to the Advisers Act in 2011, an investment adviser may not register with the SEC unless it has at least $100 Million in assets under management or maintains its principal place of business in Wyoming, the only state without investment adviser regulation. The three respondents claimed Wyoming as a principal place of business but, according to the SEC, actually operated the firms from Colorado, New Mexico, and California, as the case may be, even though the firms created Wyoming companies. The SEC charges violations of the registration rules and the ADV disclosure rules.
OUR TAKE: Since the jurisdictional changes in 2011, the SEC has brought several actions against firms that have falsely claimed that they qualified for SEC registration even though they did not have at least $100 Million in assets under management (See e.g. http://blog2.cipperman.com/2012/02/sec-files-notice-of-ria-cancellation-for-insufficient-assets/.) These are the first cases (to our knowledge) alleging the Wyoming exemption. The SEC takes this seriously because it already has plenty of work to do supervising 12,000 (lawfully-registered) RIAs and 10,000 registered funds.