Santa Barbara, CA - April 2, 2002
State Advisors remain subject to Department of Labor Form ADV Filing directive
In light of the implementation of the WebIARD, state registered investment advisors have been wondering whether they are still subject to the Department of Labor (DOL) directive requiring that they file their Form ADV with the DOL in order to be a qualified investment advisor to ERISA qualified plans. The brief answer is, yes, at least until the DOL issues new regulatory guidance.
In 1998, the DOL stated that all state registered investment advisors file a paper copy of their Form ADV with the DOL in order to qualify under Section 3(38) of Title I to ERISA. (See release reprinted below). In other words, to render investment advice to pension and other plans covered by ERISA the state registered advisor had to file its Form ADV and all subsequent amendments with the DOL. This requirement is limited to advisors registered with states, i.e. not investment advisors covered under Federal law pursuant to the National Securities Markets Improvement Act (NSMIA). At the time, the DOL foresaw that all investment advisors would file their Form ADVs electronically through a centralized database and that at that time, the DOL could obtain this information from the database. Therefore, this was just an interim requirement until the centralized database was implemented.
The SEC and the States in conjunction with the NASD have created the WebIARD or Web Investment Advisor Registration Depository. This system now allows federally covered as well as state registered investment advisors to file their Form ADVs and amendments electronically. Even though not all states mandate investment advisors to file their Form ADV with the states through the WebIARD, all states accept electronic filing of the Form ADV. Now that the WebIARD, i.e. a centralized database for the filing of the Form ADVs, has been implemented and accepted by the states, investment advisors want to know whether they need to keep filing the paper copies of the Form ADV with the DOL.
The DOL has indicated that they are aware of the issue and it seems that there will need to be a regulation adopted to implement a change to the procedure. The creation of a regulation takes some time. Approvals of the regulation initiative have to be approved by others including the OMB and the Administration as well as consultation with the SEC. The good news is that this regulatory initiative is a regulation reduction with is consistent with the Administration's e-commerce initiative. Therefore, passage of the necessary regulation should not be drawn out. It is hard to guess when we will see passage of the regulation but it will not be likely until very late this year or sometime next year. In the meantime, state registered investment advisors who advise ERISA qualified plans will have to continue to file their Form ADVs directly with the DOL.
If you have any questions on this or other investment advisor compliance issues, please give Tim Mahota, Partnervest's Chief Compliance Officer a call at 805) 966-1266.
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RELEASE REPRINT
U.S. DEPARTMENT OF LABOR
Pension and Welfare Benefits Administration
PWBA Press Release: Labor Department Announces Procedure for State-Registered Investment Advisers to Obtain ERISA Investment Manager Status [01/14/1998]
For more information call: (202) 219-8921
The U.S. Department of Labor today announced a new procedure state-registered investment advisers must follow in order to obtain investment manager status under federal pension law.
Under Public Law 105-72, signed into effect on Nov. 10, 1997, state-registered investment advisers seeking investment manager status under the Employee Retirement Income Security Act (ERISA), must file with the Labor Department a copy of their most recently filed state registration form and any subsequent filings. Generally, the new filing requirement applies to investment advisers who manage less than $25 million and who are required to register under state law. Advisers who are required to register in multiple states need only provide the department a copy of the registration form filed in the state where they maintain their principal office and place of business.
Investment advisers may initially file their registration forms with the department anytime prior to Nov. 10, 1998, to satisfy the new requirement for ERISA investment manager status. Any subsequent filings with the state should be filed with the department at the same time. Copies of these filings should be mailed to the department at the following address:
Investment Adviser Filings, Room N-5638
U.S. Department of Labor, PWBA
Office of Program Services
200 Constitution Avenue, NW
Washington, DC 20210
The requirement for filing with the department is temporary and will only remain in effect until a centralized database containing the registration forms (or substantially similar information) is available through the Securities and Exchange Commission (SEC) or other organization. At that time the department will provide notice that filing with the department is no longer necessary.
The Pension and Welfare Benefits Administration has prepared a brief on the new filing requirement. Copies may be obtained by calling the department's Publication Hotline at 1-800-998-7542. This brief, along with other publications concerning ERISA provisions that may be applicable to investment advisers, is also available on PWBA's website at http://www.dol.gov/dol/pwba/public/pubs/brief2.htm. A listing of investment advisers who have filed with the department, along with their initial and latest filing dates, will be available on the website after November 1998. This information may also be obtained from the Pension and Welfare Benefits Administration's Public Disclosure Office at (202) 219-8771.
Additional information on the division of the regulation of investment advisers between the SEC and the states is available from the SEC, while information about the state regulation of investment advisers is available from the states. The names and addresses of the appropriate regulatory official for each state can be obtained by calling the North American Securities Administrators Association at (202) 737-0900.
