Category Archives: Investment Advisor

California Extends Hedge Fund IA Exemption Implementation

Extension of Comment Period Delays Implementation of Private Adviser Exemption

As we have advised previously, states are responding to the Federal overhaul of investment adviser registration requirements by evaluating and in some

case changing their own laws governing investment advisers. This response, spearheaded by the National Association of Securities Administrators, or NASAA, includes exemptions for advisers to certain private funds.

In December, California’s Department of Corporations (the “Department”) released its own proposed exemption, which we discuss in detail here. In sum, the proposed rule, if

adopted, will exempt many hedge fund managers from registration with the state of California. The firm must provide advice solely to one or more “qualifying private funds,” which includes Section 3(c)(1), Section 3(c)(7) funds and certain other funds that fall under an Investment Company Act of 1940 exception. In addition, the adviser must:

  • have not violated securities laws;
  • file periodic reports (an abbreviated version of the Form ADV);
  • pay the existing investment adviser registration and renewal fees ($125); and
  • comply with additional safeguards when advising funds organized under Section 3(c)(1) (other than venture capital companies).

The initial deadline for comments on the proposal was February 20, 2012. However, the Department has extended that deadline to March 25, 2012.

While the rule is being considered, California has extended its existing private adviser exemption until April 19, 2012. If the new rule is not adopted by that time and the current exemption is not extended, those fund managers with over $25 million in assets under management must register in California. If however, the new rule is adopted, such managers will be exempt from registration. As long as their assets under management fall below $100 million, they will only have to file certain reports (similar to the reports filed by Exempt Reporting Advisers) with California. Once their assets under management exceed $100 million, they will have to register with the SEC unless an exemption applies (e.g. the Private Adviser Exemption).

The proposed exemption will significantly change the registration regime in California. Firms that solely manage qualifying funds and meet the additional requirements will not have to register and those that are currently registered may withdraw their registration. California fund managers with less than $100M in AUM generally will not be registered with any regulatory agency.


The original comment period ending February 20 gave California fund managers plenty of time to evaluate their current business, future plans and potential eligibility for the exemption prior to the deadline for the ADV Annual Updating Amendment (deadline March 31). With the comment period extended to March 25, and final adoption of the exemption likely pushed to early April, managers will now need to plan on filing their annual updating amendment as usual; managers whose registrations are pending should proceed with that process until the final rule is released.


Cole-Frieman & Mallon LLP provides hedge fund and adviser registration services to managers throughout the United

States. Bart Mallon can be reached directly at 415-868-5345.

Investment Adviser Registration Presentation for Fund Managers

Below is a press release on the investment adviser registration presentation we developed to help fund managers with the SEC registration requirements.


Investment Adviser Registration Presentation for Fund Managers Released by Cole-Frieman & Mallon LLP

March 30, 2012 Deadline for SEC Registration Approaches

SAN FRANCISCO, CA – January 25, 2012 — Cole-Frieman & Mallon LLP, a leading boutique investment management law firm, is proud to announce the release of a presentation designed to help fund managers understand their registration obligations with the U.S. Securities and Exchange Commission. Many hedge fund managers who are not currently registered with the SEC will be required to be registered by March 30, 2012. Because of the application process, managers will need to submit their registration applications to the SEC by February 14, 2012. The presentation is posted on the Hedge Fund Law Blog at

The presentation, which includes a voice-over discussion, provides both hedge fund and private equity fund managers with a high level overview of the registration process and important compliance issues. “Most private fund managers have a general idea that they need to register with the SEC but many have delayed beginning the process,” said Bart Mallon, a partner with Cole-Frieman & Mallon LLP. “We developed this presentation to remind managers of the requirements but to also provide them with accurate information about what it means to go through the registration process and become registered with the SEC.”

In addition to information on the investment adviser registration process, the presentation also details compliance obligations of registered managers. “Fund managers tend to underestimate the importance of a proper SEC compliance program,” said Niel Armstrong, president of Gordian Compliance Solutions, a compliance consulting firm that offers fund managers outsourced SEC compliance solutions. “Implementing a robust compliance program that is tailored to a fund manager’s specific organizational structure is important from a regulatory perspective,

and many managers also find a business benefit when they employ compliance best-practices.”

Cole-Frieman & Mallon partner Aisha Hunt added “Fund managers generally have business specific needs that should be addressed during the SEC registration process. The presentation and supplementary information on the Hedge Fund Law Blog will provide those managers with the resources they need to understand the relevant business and compliance issues and begin the registration process.”


About Cole-Frieman & Mallon LLP

Cole-Frieman & Mallon LLP is a premier boutique investment management law firm, providing top-tier, responsive and cost-effective legal solutions for financial services matters. Headquartered in San Francisco, Cole-Frieman & Mallon LLP has an international practice that services both start-up investment managers, as well as multi-billion dollar firms. The firm provides a full suite of legal services to the investment management community, including: hedge fund, private equity fund, venture capital fund, and mutual fund formation, adviser registration, counterparty documentation, SEC, CFTC, NFA and FINRA matters, seed deals, hedge fund due diligence, employment and compensation matters, and routine business matters. The firm also publishes the prominent Hedge Fund Law Blog (, which focuses on legal issues that impact the hedge fund community. For more information please visit us at:

California Proposes Private Fund Adviser Exemption

Hedge Fund Managers Exempt from Registration in California

As a general proposition, managers who are located in California must register as an investment adviser if they are providing investment advice for compensation.  There are exemptions from the registration requirement which we have detailed previously.  Because of the changes in the statutes and regulations at the Federal level, the states are changing their laws with respect to adviser registration.  Some states, such as California (see post), have adopted interim orders for certain advisers to address gaps in the Federal and state laws until state laws or appropriate regulations can be adopted.  California is proposing to adopt laws which would exempt many hedge fund managers from registration with the California Securities Regulation Division.

The proposed regulations if adopted would likely go into effect sometime in the first half of 2012.  The California Department of Corporations has requested comments on the proposal which may be submitted by February 20, 2012.  We have summarized the proposed exemption below and for more information, please see the following releases:

California Private Adviser Exemption Overview

If the proposed rule is approved, a manager would be exempt from registration as an investment adviser with the state of California if the manager meets the following requirements:

  • manager provides advice only to one or more “qualifying private funds” (includes Section 3(c)(1) funds and Section 3(c)(7) funds)
  • manager may not have not violated securities laws;
  • manager must file periodic reports with the Department of Corporations (an abbreviated version of the Form ADV);
  • manager must pay the existing investment adviser registration and renewal fees ($125); and
  • manager must comply with additional safeguards when advising funds organized under Section 3(c)(1) (other than venture capital companies). This includes:
    • only accredited investors may invest in the private fund;
    • the firm shall provided certain written disclosures about the services it provides, its duties, and other material information;
    • the firm shall obtain an annual audit of each fund and deliver them to each investor; and
    • performance fees can only be charged to qualified clients.

Firms may register with the SEC once they reach $100M in AUM. Therefore, the firm may rely on the California private adviser exemption and then, absent an exemption from SEC registration, register with the SEC at that point. Section 203(m) of the Adviser’s Act of 1940 (as amended by Dodd-Frank) provides such an exemption from such registration if the firm only manages private funds and has less than $150M AUM (the firm would be an exempt reporting adviser and would have to file the abbreviated Form ADV with the SEC).

Funds with Non-Accredited Investors

The proposed rule does have a grandfathering provision that will make the California private adviser exemption available to a firm that currently manages any Section 3(c)(1) fund that has non-accredited investors if the following requirements are met:

  • the fund existed prior to the effective date of the California private adviser exemption;
  • as of the effective date of the Private Adviser Exemption, the fund no longer accepts accredited investors;
  • the firm provides certain written disclosures about the services it provides, its duties, and other material information; and
  • as of the effective date of the Private Adviser Exemption, the firm delivers audited financials to the investors.

Currently, the proposed rule does not have an anticipated effective date. If approved, managers of funds with non-accredited investors may still qualify for the Private Adviser Exemption.


The California private adviser exemption will change the entire registration regime in California. Firms that solely manage qualifying funds and meet the requirements discussed above will not have to register with the DOC and those that are currently registered may withdraw their registration. So, hedge fund managers in California with under $100M in AUM generally will not be registered with any regulatory agency. Do keep in mind that if a manager manages even a single separate account, in addition to the qualifying funds, it will not be eligible for the private adviser exemption.


Cole-Frieman & Mallon LLP provides investment adviser registration and compliance services to hedge fund managers.  Bart Mallon can be reached directly at 415-868-5345.

Revised Form ADV Part 1 Now Available on IARD

New Questions Added to Form ADV Part 1

The SEC has released a new Form ADV Part 1a which includes a number of additions as described in greater depth below.  Please also see the the paper version of the new Form ADV Part 1 which is currently effective.

Since enactment of the Dodd-Frank Act, the SEC has adopted a series of rules that have a significant impact on investment advisers and the IA registration process. Last year, amendments to the Form ADV Part 2 required registered investment advisers to provide new and prospective clients with a brochure and brochure supplements prepared using a “plain English” narrative approach. The new Form Part 2 became effective January 1, 2011 for new registrants and March 31, 2011 for registrants updating their Form ADV. Many states followed suit requiring the use of the new Form Part 2.

Overview of Major Changes to Form ADV Part 1

The new Form ADV Part 1 is now available on the IARD website. The changes reflect the new asset thresholds and the SEC’s effort to gather detailed information about investment advisers and their operations. For example, Section 7 now requires the following information about private funds (defined as “an issuer that would be an investment company as defined in section 3 of the Investment Company Act of 1940 but for section 3(c)(1) or section 3(c)(7) of that Act”):

  • a private fund identification number (which is assigned to the fund)
  • whether the fund is part of a master-feeder structure (and if so, information about the master and/or feeder funds)
  • whether the fund is a “fund of funds
  • details about the beneficial owners of the fund
  • information about whether the fund relies on an exemption from registration under Regulation D of the Securities Act of 1933
  • details about the fund’s service providers

Next Steps

For firms who have not started the registration process, completion of the new Form ADV Part 1 will take longer because of the additional information that must be collected.  For firms who have begun the process but have not yet been registered with the SEC or state, it is likely that the new information will be required to be submitted prior to registration being approved by the SEC or state securities commission.  For advisers who are already registered with the SEC or state, the new questions will need to be completed as part of the Annual Updating Amendment (for more information, please see our post for the requirement in 2011 – we will have a similar post for 2012 after the new year).  The due date for the Form ADV Annual Updating Amendment approaching is March 30, 2012.

Should you have any questions on the completion, submission, and/or reporting deadlines for Form ADV, please feel free to contact us or call Bart Mallon directly at 415-868-5345.


Cole-Frieman & Mallon LLP provides investment adviser registration and compliance services to private fund managers.  The firm has a robust investment management practice catering to hedge fund managers, mutual fund managers and institutional investors.

SEC Action Against Hedge Fund Manager for Marketing Misrepresentations

SEC v. Andrey C. Hicks and Locust Offshore Management, LLC

Marketing, of course, is an issue close to the heart of every hedge fund manager. You spend so much time and effort making your pitchbook and other materials exactly right in terms of strategy, investment process and all the details that help you make the most of your investor meetings. It needs to look great; it needs to tell your story, and as the SEC recently reminded us, it needs to be the truth, the whole truth, and nothing but the truth.

Overview of Case

On October 26, 2011, the SEC filed an action in the US District Court for the District of Massachusetts against Andrey C. Hicks (“Hicks”) and Locust Offshore Management, LLC (“LOM”). Hicks and LOM purported to manage a British Virgin Islands-based investment vehicle named Locust Offshore Fund, Ltd. (the “Fund” and collectively with Hicks and LOM, “Locust”), which employed a strategy based on a quantitative model developed by Hicks. The SEC alleged that the Fund was in fact part of a fraudulent scheme that ultimately funneled incoming subscriptions into Hicks’ personal accounts.

According to the complaint (see SEC v. Hicks & Locust),  the scheme depended on a number of misrepresentations found in LOM’s website, the Fund’s offering memorandum, Hicks’ email correspondence, Hicks’ verbal statements to at least one investor, post-subscription correspondence with investors.

The SEC asserted causes of action under Section 17(a) of the Securities Act (fraudulent interstate transactions), Section 10(b) of the Exchange Act and related rules (prohibiting the use of manipulative and deceptive devices); Section 206(4) of the Advisers Act (prohibiting act, practice or course of business that is fraudulent, deceptive or manipulative), and for equitable relief.

The District Court issued a temporary restraining order and asset freeze against Locust.

Takeaways for Managers

The alleged misrepresentations included the following:

  • Statements that the Fund was formed and registered as a professional fund in the British Virgin Islands, when in fact no such entity had existed or been registered there;
  • Flowing from the above, any statement identifying Hicks as the portfolio manager, director, or other principal of the Fund or LOM, as well as any statement that LOM was the manager of the Fund;
  • Identifying Ernst & Young as the auditor of the Fund, and Credit Suisse as the Fund’s prime broker, when in fact neither company had ever been retained to provide services to the Fund;
  • Statements that the 27 year old Hicks held an undergraduate degree and doctorate degree in applied mathematics from Harvard, when in fact he had only attended three semesters as an undergraduate, and was forced to withdraw due to repeated failure to meet academic standards. Hicks received a D minus in the only math course he took;
  • Statements that Hicks managed a book of futures, options and foreign exchange investments at Barclays, and grew his book nearly two-fold during his brief tenure, when in fact he had never been employed at Barclays; and
  • Assurances to at least one investor that his subscription monies had been received and were “entered into live trading,” and similar statements.

The first investor in the Fund, referred to as Investor A, met Hicks on an airplane and the two fell into conversation. The above statements, found in the offering documents, on the website and in other materials, were reinforced during their conversation. Hicks talked about his education and professional experience, showed Investor A LOM’s website on his Blackberry, and the two parted, exchanging their business cards. The chance meeting and follow-up emails were evidently persuasive; Investor A wired his subscription monies about a month later.

This action highlights several points for managers:

  • Do not lie in your marketing materials; in biographies especially, take care to avoid statements that exaggerate education, qualifications, experience and expertise;
  • Carefully check all facts, even basic data such as service provider information and fund formation details in all areas where they appear (not merely obvious places like your fund offering documents, but any presentations, pitchbooks, websites or other materials);
  • Maintain files of backup materials to document every factual statement made in your offering documents, marketing materials and on your website;
  • The anti-fraud provisions of the securities laws have a long reach and managers should be careful about all communications, not just in their marketing materials. Evaluate letterhead, business cards, email signatures and speak with all employees, but especially those involved in marketing, regarding appropriate parameters for meetings (planned or chance) with potential investors.


Although Hicks is an extreme example, all managers should ensure that their funds’ offering documents marketing materials, stationery, written correspondence, and verbal statements are accurate, including with respect to service provider information, fund formation details, and biographies. To the extent that managers provide such information on their websites, all of these details should be confirmed as accurate on the website itself, and in any linked or uploaded materials.

We recommend that your attorney, in-house counsel or compliance consultant review all marketing materials prior to distributing them, and retaining these materials and backup information in your files.

For more information please see the complaint above of the SEC litigation release.


Cole-Frieman & Mallon is a boutique hedge fund law firm which provides fund formation, business and compliance services to fund managers.  Bart Mallon can be reached directly at 415-868-5345.

Investment Adviser and IA Representative Registration Renewal 2012

If your firm is registered as an investment adviser (IA) then you may have received notice from FINRA to renew your firm’s registration for 2012. If you have not received the notice or have not paid the renewal fees, the following provides an overview of the process.


IA firms and IA representatives (RA) should be aware that registrations expire annually on December 31. In order for an IA firm to maintain their active registrations and/or notice filing statuses and for RAs to maintain active registration statuses, the IA firms must pay applicable renewal fees annually. The IARD Renewal Program facilitates the annual renewal process. A Preliminary Renewal Statement which is made available on the IARD system, will include an amount that must be paid to FINRA by December 12, 2011. Remember to allow sufficient time for payments made by check and sent through the postal service. Online payments made via E-Pay should be made by December 8, 2011 in order for the funds to be posted by December 12, 2011.

Submitting Payment

This year, the preliminary renewal statement will be made available on November 14, 2011. IA firms can access this statement via IARD by following these steps:

  1. Log onto IARD at (
  2. Enter your firm’s ID and password.
  3. Review and accept the terms and conditions.
  4. Under the “Accounting” tab at the top of the page, select “Renewal Account.”
  5. One the left column, select “Renewal Statement.”

The bottom of the page provides an itemized list of all applicable fees.

Payment by Check

If you choose to submit payment by check, print the statement and mail it, along with the check to the following address:

U.S. Mail:

P.O. Box 7777-W8705
Philadelphia, PA 19175-8705

(Note: this P.O. Box address will not accept courier or overnight deliveries.)

Express Delivery:

Attn: 8705
500 Ross Street 154-0455
Pittsburgh, PA 15262


The check should be made payable to: FINRA. Be sure to write your CRD Number and the word “Renewal” on the face of the check. Be sure to also include the first page of the Renewal Statement.

Payment via CRD/IARD E-Pay

Payment can also be submitted online via CRD/IARD E-Pay. To do so, follow these instructions:

Go to the E-Pay website.

  1. Enter your login and password.
  2. On the left column under “Payments,” click “Pay my accounts.”
  3. Select the account and click “Continue.”
  4. Enter the total Payment Amount and check “Renewal” under Account Type. Then enter the payment method and click “continue.”
  5. Review the information and click “Make Payment.”
  6. Log out and the money should post within about 2 days.

Automatic Daily Account-to-Renewal Account Transfer

If your firms has sufficient funds in the Daily Account to cover the total renewal amount, FINRA will automatically process the renewal payment by the payment deadline.

Other Payment Methods

Wire payments sent by 2 p.m. (ET), should post the next business day. Wire payments sent after 2 p.m., ET, may take up to 2 business days to post. Instructions for initiating a wire can be found here.

Confirming Payment

After payment is submitted, you will be able to retrieve your firm’s online Final Renewal Statement on IARD on or after January 3, 2012. These statements will reflect the final registration status of the IA firm and RAs. To do so, follow the instructions above to log onto IARD. Under the “Renewal Statement” link in the “Accounting” section, you can retrieve the Final Renewal Statement, which will state “Paid in Full” or “Amount Due.” If an amount is due, the balance must be paid by February 3, 2012.

It is important to make sure payment is made by the deadline, otherwise the registration may be terminated. The firm will then have to contact each regulator to request re-registration instructions.

More information about the Renewal Program can be found on the IARD website. FINRA has also posted a bulletin on the 2012 IARD Renewal Program, available here.


Cole-Frieman & Mallon LLP is a boutique hedge fund law firm and provides investment adviser registration and renewal services. Bart Mallon can be reached directly at 415-868-5345.

California’s Hedge Fund "Pay to Play" Laws Updated

New Lobbyist Requirements Apply to Hedge Fund Placement Agents

With the enactment of AB 1743 (effective January 1, 2011) and SB 398 (effective October 9, 2011), California has imposed new requirements on persons who market investment managers and their funds to California pension plans – that is, California Public Employees’ Retirement System (CalPERS) and the California State Teachers’ Retirement System (CalSTRS). The laws, similar to the recently passed SEC pay to play rules, are designed to prevent “pay-to-play” activities to increase transparency and accountability by prohibiting a person from acting as a “placement agent” in connection with any potential investment by CalPERS or CalSTRS.

Placement Agents Deemed to be Lobbyists

Placement agents—generally persons that are compensated to act for an external investment manager in connection with securing an investment by CalPERS and CalSTRS—are considered lobbyists under the new laws. SB 398 clarifies that placement agents include those that market interests in any type of private investment fund (not just marketing investment management services), including private equity funds, hedge funds, venture capital funds, and real-estate funds. There are two exclusions from being considered a placement agent under the laws:

“(1) an employee, officer, director, equityholder, partner, member, or trustee of an external manager who spends one-third of his or her annual time managing the assets held by the external manager; and

(2) any employee, officer, director or affiliate of an external manager, if that external manager is: (a) registered with the SEC or a comparable state securities regulator; (b) selected for investment through a statutorily defined competitive bidding process; and (c) willing to be subject to the fiduciary standard of care applied to the retirement fund board.”

Placement Agent Registration Requirements

Placement agents must register under the Political Reform Act of 1974 (PLR) prior to acting as a placement agent. Additionally, among other things, placement agents:

  • Must not make gifts to a person totaling more than $10 in any calendar month if that person works for CalPERS or CalSTRS;
  • May not make a political contribution to any elected state officer or candidate for elected office if the agent is registered to lobby the governmental agency for which the candidate is seeking election (e.g. CalPERS Board Member, CalSTRS Board Member, Supt. of Public Instruction, State Treasurer, or the State Controller; and
  • May not receive fees that are contingent on the outcome of any proposed legislative action or administrative action, including investment decisions.

Local Lobbyist Regulations

The new laws also subject placement agents to “applicable” local lobbyist regulation if the agents market to local government plans. Before marketing to any California city or county retirement system, investment managers should evaluate the relevant local lobbyist ordinances to determine which, if any, local requirements may apply.


Cole-Frieman & Mallon LLP is an investment management boutique law firm.  The firm’s clients include hedge fund managers, hedge fund investors and other groups within the investment management industry.  Bart Mallon can be reached directly at 415-868-5345.

Connecticut Issues Orders Regarding Investment Adviser Registration

Three Orders Focused on New Hedge Fund Regulations

On June 11, 2011, Connecticut Department of Banking issued three orders relating to Connecticut investment adviser registration requirements in response to the SEC issuing final hedge fund registration regulations required by the Dodd-Frank Act.  The orders (1) create a registration transition period for previously exempt advisers, (2) provide several new exemptions from state registration and (3) define the term “client” for the purposes of Connecticut’s de minimus exemption.

First Order – State Registration Timeline

The first order establishes a state registration timeline for Connecticut advisers affected by the Dodd-Frank Act.  Under this order the following timelines will be in effect:

Investment advisers currently registered with the SEC with assets under management of less than $90 million as of March 30, 2012, will have until June 28, 2012 to withdraw from registration with the SEC and register as an investment adviser in CT.

Investment advisers who had relied on the repealed “private adviser” exemption under Rule 203(b)(3) will have until March 30, 2012 to either register with Connecticut or to register with the SEC and make a notice filing with Connecticut.

Investment advisers who are not eligible for SEC registration or for either of the above deferrals and new advisers starting their advisory business after July 21, 2011 must continue to comply with applicable Connecticut registration and notice filing requirements.

This first order can be found here.

Second Order – Exemptions from Connecticut IA Registration

Previously, Connecticut provided an exemption from investment adviser registration for those hedge fund managers who were located in Connecticut and had more than $25M in assets under management and managed less than 15 hedge funds. The new order repeals this previous exemption and adopts the same exemptions from Connecticut state registration as have been adopted by the SEC.

Accordingly, the following investment advisers are exempt from registration in Connecticut:

  • Foreign private advisers
  • Investment advisers that are registered with the CFTC
  • Investment advisers to small business investment companies
  • Investment advisers to venture capital funds
  • Investment advisers solely to private funds with assets under management of less than $150 million.

Some of these exempted advisers will still be subject to various reporting and recordkeeping requirements by the SEC and may need to make notice filings and/or reports available to Connecticut.

It is important for managers to understand that the above extensions don’t apply to investment advisers and fund managers commencing business on or after July 21, 2011. Those investment advisers and others that don’t fall into the described exemptions remain subject to applicable registration and notice filing requirements in Connecticut.

The second order can be found here.

Third Order – Definition of “Client” for Connecticut’s De Minimus Exemption

To further conform its regulations to the new SEC rules, Connecticut has adopted the definition of “client” in accordance with the Investment Advisers Act Rule 202(a)(30)-1 for Connecticut’s de minimus exemption. The de minimus exemption allows an investment adviser to not register with the state if the investment adviser:

  1. does not have a place of business in Connecticut AND
  2. during the preceding 12 month period had fewer than 6 “clients” who are residents of Connecticut

Under the new Connecticut rule, a single “client” generally means:

  1. a natural person, family members of the same household and accounts for such persons OR
  2. an entity (such as a hedge fund) to which the investment adviser provides investment advice based on the entity’s investment objectives (two entities with exactly the same ownership can, together, be counted as a single client)
The third order can be found here.


The new SEC rules implementing investment adviser regulation amendments under the Dodd-Frank Act have created new compliance and regulatory issues for investment advisers. States will need to amend their rules to coordinate their regulatory regime with the new changes. We expect to see similar releases from other states in the coming weeks, and will be providing updates as appropriate.


Cole-Frieman & Mallon LLP provide advice with respect to hedge fund formation as well as investment adviser registration and compliance.  Bart Mallon can be reached directly at 415-868-5345.

Arizona IA Representative Documentation Requirement

Arizona Hedge Fund Manager Documentation Requirements Increase

In addition to

increased requirements under the Dodd-Frank Act, various states are increasing requirements for state registered investment advisers and their representatives.  Many regulations are going to be based on the prevailing political climate in a particular state and the new requirements for Arizona based advisers is no exception.  IA firms and representatives may have received communication from Arizona regarding a new documentation requirement for IARs – in essence IARs must show they are U.S. citizens or in the United States legally.  The documentation requirement went into effect last month and will be a new requirement for conducting an investment advisory business in Arizona.

Overview of Documentation Requirements

Under a Arizona regulation A.R.S. § 41-1080, effective as of July 20, 2011, certain investment adviser representatives (“IARs”) must provide documentation of lawful presence in the United States to the Arizona Securities Commission.  In general IARs in Arizona will need to provide documentation to the Commission if:

  • the IAR is an Arizona resident registering as an IA representative in Arizona for the first time
  • the IAR is a non-Arizona resident registering as an IA representative only in Arizona, and you are not registered as such in any other state
  • the IAR is currently an IA representative registered in Arizona, planning to renew registration for the coming year, 2012.  [Note: documentation must be submitted before the 2012 renewal.]

If the IAR is a non-Arizona resident registering in Arizona but is already registered as an IA representative in another state, the IAR will not be required to provide the documentation.

Approved Documentation & Submission Requirements

The following is a list of approved forms of documentation for submission to the Arizona Securities Commission:

  1. An Arizona driver license issued after 1996 or an Arizona non-operating identification license.
  2. A driver license issued by a state that verifies lawful presence in the United States.
  3. A birth certificate or delayed birth certificate issued in any state, territory, or possession of the United States.
  4. United States certificate of birth abroad.
  5. A United States passport.
  6. A foreign passport with a United States visa.An I-94 form with a photograph.
  7. A United States citizenship and immigration services employment authorization document or refugee travel document.
  8. A United States certificate of naturalization.
  9. A United States certificate of citizenship.
  10. A tribal certificate of Indian blood.
  11. A tribal or bureau of Indian affairs affidavit of birth.

Submitted documentation must include a photo of the IAR as well as the CRD number of the IAR.  Documentation may be submitted by mail or email to:

Registration and Compliance Section
Arizona Corporation Commission, Securities Division
1300 W. Washington St., 3rd Fl.
Phoenix, AZ 85007
Email: [email protected]

For more information, please visit the IA representative registration licensing section on the Arizona securities Division website or contact the Securities Division at 602-542-0326 with any questions.

A notice of the regulation can be found on the Arizona Securities Division website here.


Cole-Frieman & Mallon LLP provides legal and compliance services to state registered hedge fund managers.  Bart Mallon can be reached through our contact form or by phone directly at 415-868-5345.

Series 65 Exam Opinions Requested

Seeking Opinions on How to Pass to the Series 65 Exam

I am hoping readers of this blog would be able to provide some feedback on their experiences with the Series 65 exam. As a

little background, many of our firm's clients are managers who will be state registered investment advisers and therefor these groups will need to make sure certain individuals take the Series 65 exam in order to become registered in the state of principal residence.

The North American Securities Administrators Association (NASAA) is the group in charge of creating the Series 65 and the exam is administered by FINRA at any number of locations across the U.S. and in different countries. At the beginning of 2010 NASAA changed the grading of the Series 65 exam so that it was more difficult to pass. From that time forward we have anecdotally noticed that there were in fact less people who were passing the exam on the first try.  Accordingly, we are trying to gather information on the exam to help out those people who will be taking it in the future.

If you have taken the e

xam over the last year we are asking if you can provide us with a little information on your experiences and some thoughts on how you would prepare for the exam, given what you know now. For example, we think the following information would be helpful:

  • Date you took the exam (month, year)
  • Final score
  • Series 65 Exam prep / study guide(s) you used
  • Amount of time spent studying (approximate number of hours)
  • Number of practice exams you took? Scores on those exams?
  • Areas you did well on/ could have done better on
  • Overall impressions – was it similar to the practice exams?
  • How would you study for the exam differently?

If you have other comments or information that might be helpful, please feel free to post that as well.  Responses can be posted in the comment section below or you can contact us directly.


Cole-Frieman & Mallon LLP is a boutique law firm focused on the hedge fund industry.  We help fund managers with investment adviser registration and hedge fund formation matters.  Bart Mallon can be reached directly at 415-868-5345.