This guide is your first step toward wearing your Chief Compliance Officer cape with confidence. Together we’ll demystify the process and equip you with everything you need to know about initial registration of your RIA .
You’re in the right place if you plan to register your RIA at the state level in your primary jurisdiction (the state where your principal place of business is located).
You’re also in the right place if you reasonably expect to have $100M or more in regulatory AUM within 120 days of becoming registered, in which case you’ll likely qualify to register with the SEC* rather than at the state level.
*The process of preparing and submitting the application is almost the same for both; however, the SEC generally doesn’t require additional documents beyond Form ADV, Form CRS, and Form U4 submission through the Finra Gateway. We will touch on the other differences later in this guide.
XYPN Compliance was a critical resource during the initial registration process. From the templates to the open office hours, they were there every step of the way. The Compliance team had a thorough understanding not just of the paperwork that was needed, but the timeline and work-style personalities of the regulators in many states to be able to communicate expectations during the approval process. The templates and resources were extremely helpful in expediting registration and increased my confidence in my compliance program and the initial registration process. XYPN Compliance is an invaluable resource and I would highly recommend them.
Worried about going it alone? Don’t be. XYPN Compliance offers solutions to help you every single step of the way!
With XYPN Compliance this step is as easy as:
Attend a Preparing to Register Call the compliance solutions team holds weekly for an overview of the process
Fill out their short and simple RIA Registration Questionnaire that will become the foundation for the application forms they draft and submit for you
Establish your FINRA GatewayThe FINRA Gateway is the regulatory filing and reporting portal used to administer your registrations and filings for your firm and all supervised persons.
Start by setting up a Super Account Administrator, which can be done by filling out the New Organization SAA Entitlement Form.
Once established, you may need to set up specific entitlements for your user access. If so, follow these instructions.
Within the Finra Gateway, you will have access to both the Central Registration Depository (CRD) and the Investment Adviser Registration Depository (IARD) system.
The CRD System is your primary dashboard when logged in and is where you administer the registration and filing information for any IAR of your firm.
The IARD System is where your firm’s Form ADV is filed, including filing for your firm’s registration with any jurisdiction.
Here’s when the good stuff begins. We’ve been told that connecting with the Compliance team is often the highlight of this whole process. Their friendly expertise and depth of knowledge of the regulatory intricacies for each State jurisdiction has put hundreds and hundreds of new firm owners’ minds at ease.
During this step you will get introduced to a member of the Compliance team who will guide you through the following:
Review and select the Compliance plan that fits you best Sign an engagement agreementDetermine your location-based registration fees (applicable to the state jurisdiction where your firm will register and offer its services)
Receive instructions for funding your FINRA “E-Bill” Account and creating limited access for your Compliance team to submit your application and forms on your behalf
NOTE: E-Bill is FINRA’s financial system that enables users to view and fund all the accounting details of FINRA Flex-Funding and Renewal Accounts, pay annual renewal assessments, and view and pay FINRA invoices.
It is crucial to pay these fees and ensure they are available in your E-Bill account before the Form ADV can be submitted to initiate your firm’s registration.
Curious what your registration fees will be in your jurisdiction?
Google “Investment Advisor Registration in [Your State]” and locate the search result for your securities division website.
If you are registering with the SEC, you can review the initial and annual filing fees here.
After you’ve fully funded your E-Bill Account and provided the Compliance team their FINRA Gateway access information, they will start your application process by drafting your ADV.
What’s that you ask? Well, as stated in the Kitces.com blog, Form ADV Part 1: Common Missteps And Best Practices For RIAs:
“Form ADV is perhaps the most important document a registered investment adviser will prepare in the entirety of its life cycle—at least from a regulatory perspective. This is not only because it is filed with the SEC and/or state securities regulatory authorities, but also because it is publicly available and ostensibly relied upon by prospective clients when evaluating whether or not to entrust their life savings with a particular adviser.”
From the same blog, Form ADV is: “A standardized description of each RIA’s services, fees, and business practices, presented in a series of four forms (Part 1, Part 2A, Part 2B, and Part 3).”
Your form ADV (specifically Part 2A) is referred to as your firm’s disclosure brochure or simply your “firm brochure.” During the preparation of your registration application, drafting of this brochure is critical as it will be the primary focus of review by state regulators (or the SEC) when they evaluate your application.
We often encounter advisers just starting out who get stuck on what to include in their firm brochure, as they don’t want to be “locked in” to something knowing that their firm will evolve after launching. We remind them that this disclosure brochure is never intended to be set in stone once it’s filed and should be viewed as more of a living document that is maintained and revised as the firm’s business practices evolve.
For purposes of getting registered, focus on the services, compensation, and practices that you know you will be prepared to engage in upon launching or within the first year of operations. You will quickly learn how to make updates to these documents when necessary once you get your firm off the ground. And we can help with those updates too, btw.
ADV Part 1 (no a.k.a for you, Part 1) Part 1 requires information about the investment adviser’s business, ownership, clients, employees, business practices, affiliations, and any disciplinary events of the adviser or its employees.
ADV Part 2A (a.k.a. the “Brochure” and, if applicable, “Wrap Fee Program Brochure” or just “Part 2A Appendix 1”) Part 2A requires a written narrative brochure with information about your firm’s services, fees, conflicts, and personnel. The instructions require 18 disclosure items (19 for state-registered firms), which must be included in the brochure.
ADV Part 2B (a.k.a the “Brochure Supplement”) Part 2B contains required information about the individuals providing financial advice at your firm. It should be consistent with Form U4 in all material respects.
ADV Part 3 (a.k.a. Form CRS or “Relationship Summary”)
In short, Form CRS—short for customer relationship summary—is a written disclosure you must provide to clients to share key information about your background and practices. Form CRS* is a brief relationship summary containing plain English disclosures on specific topics designed to help retail investors make informed choices when deciding which advisory firm they want to work with based on alignment of their goals and objectives.
Once you review, approve and give permission for your Compliance Teammate to submit your ADV, filing triggers notification of pending application—AND THE REVIEW PROCESS BEGINS. (Yay!)
