Florida Hedge Fund Law – Investment Advisor Registration Information

Florida is a very popular jurisdiction for hedge fund formation.  Along with New York, Connecticut, California, and Texas, Florida ranks as one of the most popular hedge fund jurisdictions.  I have included below a description of the investment advisor provisions from the Florida Securities Division website.  One thing to note, as with all Securities Division websites, is that the information below is not the full picture.  For instance, the notice below does not mention a common provision which exempts Florida hedge fund managers from investment advisor registration with the state.

The discussion above is general in nature, please review our disclaimer. As always, the facts of your particular situation may be such that the general information posted above is inapplicable.  A potential hedge fund manager should always discuss the facts of their particular situation with their hedge fund attorney.  Other related hedge fund law articles include:

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The following notices can be found here.

Division of Securities
INVESTMENT ADVISER
Requirements to Maintain Registration

FILING REQUIREMENTS TO CONDUCT BUSINESS IN FLORIDA

• If you are not registered with the SEC as a federal covered investment adviser, you are required to register in Florida in order to conduct investment adviser business in this State.

EXEMPTIONS AND EXCEPTIONS FROM FILING REQUIREMENTS FOR ALL ADVISERS

• If your principal place of business is located outside the state of Florida, you may be eligible for exemption from registration under the National Di Minimis Standard which provides an exemption from state registration requirements for an investment adviser who: (1) does not have a place of business located within that state, and (2) during the preceding 12-month period has had fewer than 6 clients who are residents of that state.

• Any other exemptions or exceptions from registration can be found in Chapter 517, Florida Statutes. Section 517.171, F.S., provides that the burden of establishing the right to any exemption shall be upon the party claiming the benefit of such exemption.

• There is no requirement to notify the State where an exemption or exception from filing is claimed.
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APPLICATION REQUIREMENTS FOR AN INVESTMENT ADVISER
Submit all forms to:
NASD/IARD
Phone No: (240) 386-4848
Website: www.iard.com

Application Fee: $200 – Paid through IARD
• Form ADV: Submitted through IARD

• Designation of a Qualifying Principal: A completed application and fee must be filed at the same time as the firm application to register at least one associated person as a Qualifying Principal. Refer to the “Associated Person of Investment Adviser Application Requirements” for more information.

• Financial Statements: [This requirement applies only to Investment Advisers whose principal place of business is in Florida] Financial statements must include a balance sheet. Statements shall be prepared in accordance with Generally Accepted Accounting Principles (GAAP), and shall be dated within 90 days of the date of filing with the Office. Financials must be audited or unaudited, as explained below.

• Unaudited Statements:
If client funds and/or securities are not held, and advisory fees are not prepaid six months or more in advance and in excess of $500 per client, financials must evidence net capital (calculated as assets minus liabilities) of at least $2,500. Subordinated liabilities cannot be excluded using this method to compute net capital. Unaudited financials must be certified as true and correct by an authorized person, and notarized.

• Audited Statements:
If client funds and/or securities are not held, and advisory fees are not prepaid six months or more in advance and in excess of $500 per client, but applicant elects to compute net capital as prescribed by SEC Rule 15c3-1, financials must evidence net capital of at least $5,000 calculated as prescribed.

• If client funds or securities are held or advisory fees are prepaid six months or more in advance and in excess of $500 per client, financials must evidence net capital of at least $25,000, calculated as prescribed by SEC Rule 15c3-1.

• Notarized statement of compliance: Submit a notarized statement that your firm is familiar with, and is currently in compliance with, the investment adviser regulations of the state where your principal place of business is located (home state).

• Additional information as required: The Office has the authority to request additional information as it deems necessary during the application process.
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REQUIREMENTS FOR MAINTAINING REGISTRATION AS AN INVESTMENT ADVISER

• Amendments to Form ADV. All registered investment advisers shall submit changes to the Form ADV via IARD within thirty (30) days of such change. This includes information relating to ownership, disciplinary matters, and financial condition.

• Financials. [This requirement applies only to Investment Advisers whose principal place of business is in Florida] All statements must include at least a balance sheet and income statement. Statements shall be prepared in accordance with Generally Accepted Accounting Principles (GAAP), and shall be filed annually within 90 days after the firm’s fiscal year end. Financials must be audited or unaudited as explained above.

• Branch Office registration. For any location in Florida required to be registered as a branch office pursuant to Rule 69W-200.001, F.A.C., approval must be obtained from the Office through the branch office application process prior to operation of any such office.

• Registration of associated persons. All individuals defined as an Associated Person pursuant to Rule 69W-200.001 F.A.C. should be registered unless otherwise exempt. Applications for such persons must be filed and approved prior to such person conducting business requiring registration with the investment adviser. Every investment adviser must maintain at least one registered Principal with the Office at all times. Should the sole Principal be terminated, another Principal must be registered within thirty (30) days after such termination.

Renewal requirements

• Firms and Agents: Renewal for firms and agents is conducted in Florida on a calendar year-end basis and the renewal deadline is December 31st of each year. The renewal fee of $200 for the firm and $30 for each associated person is assessed and collected by CRD.  It is incumbent upon the registrant, not the Office, to ensure that the renewal payment is submitted timely.

• Branches: The Renewal deadline for branch office registration renewal is December 31st of each year. The renewal fee of $100 per branch is assessed and collected by CRD. It is incumbent upon the registrant, not the Office, to ensure that the renewal payment is submitted timely.
NOTE: This information is not a comprehensive summary of the rules and regulations governing compliance with Florida law. It is merely a checklist to assist registrants with filing requirements.
Refer to Chapter 517, F.S., or contact the Office, for more information.
http://www.flofr.com/Securities/iastate.htm

FEDERAL COVERED ADVISERS

APPLICATION REQUIREMENTS TO CONDUCT BUSINESS IN FLORIDA

If you are a federal covered investment adviser, you are required to file notice in Florida in order to conduct investment adviser business in this State. [You are a federal covered investment adviser if you are registered with the SEC as an investment adviser, or if you are not registered with the SEC because you are excluded from the definition of investment adviser. If you need more information to make this determination, contact the SEC at the address provided below.]

Submit all forms to:
FINRA/IARD
Phone No. (240) 386-4848
Website: www.iard.com
Notice Filing Fee: $200 – Paid through FINRA/IARD

Form: ADV, Uniform Application for Investment Adviser Registration

Associated Persons: Only agents with a “place of business” in Florida need to be registered with the Office. To register these agents, refer to the “Associated Person of Investment Adviser Application Requirements” for more information.

Branch offices: Not required to register

Additional information as required: The Office may request additional information during the application process.

Investment Adviser information can be obtained from the:
Securities and Exchange Commission (SEC)
Southeast Regional Office
1401 Brickell Avenue, Suite 200
Miami, FL 33131
(305) 536-4700
REQUIREMENTS FOR MAINTAINING COMPLIANCE AS A FEDERAL COVERED ADVISER

Amendments to Form ADV: All federal covered investment advisers shall submit changes to the Form ADV through IARD pursuant to Rule 69W-600, F.A.C.

Registration of Associated Persons: All persons defined as an associated person pursuant to Rule 69W-200.001, F.A.C. required to register in this state prior to such person(s) conducting business requiring registration with the Federal Covered Adviser in this state.

Renewal of Investment Adviser Firms: IARD shall collect renewal fees for all federal covered investment advisers filed in Florida. The renewal deadline for firms and agents is December 31 each year. (Ch. 517.12(11), F.S.)

Branch offices: Not required to register
NOTE: This information is not a comprehensive summary of the rules and regulations governing compliance with Florida law. It is merely a checklist to assist with filing requirements. Refer to Chapter 517, F.S., or contact the Office, for more information.

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