NASAA Wants Compliance Rule for 17,000 State-Registered Advisers
The association of state regulators (NASAA) advocates for a state compliance rule in its annual report of all state-registered investment advisers and representatives.
As of December 31, 2020, there were over 17,000 state-registered investment advisers (compared to approximately 13,000 SEC-registered advisers) and over 27,000 state IARs. Over 80% of state-registered firms are 1-2 person shops with primarily retail investors. In the report, NASAA highlights its most significant initiatives including the model compliance rule and accompanying compliance grid that it proposed in November. Conceived as the state analog of SEC Rule 206(4)-7, the model compliance rule is far more detailed and prescriptive and requires the chief compliance officer to be an investment adviser representative (Series 65).
Most states do not currently require its investment advisers to implement a comprehensive compliance program as required of federally-registered advisers. It’s worth asking whether states should impose this added regulatory burden on very small businesses serving a handful of retail clients.
Read the full report here.