Investment Adviser Workshop:Investment Adviser Workshop: the New Form ADV Part 2, New Rules, and the IA Switchthe New Form ADV Part 2, New Rules, and the IA Switch

Utah Rule AmendmentsUtah Rule Amendments

Chip LyonsChip LyonsAnalystAnalyst

Amended Utah Rules

• Electronic Filing MandatoryElectronic Filing Mandatory

• New Form ADV Part 2 AdoptedNew Form ADV Part 2 Adopted

• Formalized Division Notification:Formalized Division Notification:• Designated OfficialDesignated Official• Custody / DiscretionCustody / Discretion• Proof of Bond, if requiredProof of Bond, if required

IA Filing RequirementsIA Filing Requirements

IA Filing RequirementsIA Filing RequirementsAmended Utah

Rules

• Renewals – no new requirementsRenewals – no new requirements

• Increased advanced fee amountsIncreased advanced fee amounts from $500 to $1,200from $500 to $1,200

• Housekeeping: NASD => FINRAHousekeeping: NASD => FINRA

CustodyCustody

New Rule Formally Adopts the New Rule Formally Adopts the SEC’s 2010 Custody Rule 206(4)-2SEC’s 2010 Custody Rule 206(4)-2

• SEC post-Madoff goal:SEC post-Madoff goal: safeguard investor monies.safeguard investor monies.

• Seamless switch for federalSeamless switch for federal covered advisers.covered advisers.

Amended Utah Rules

CustodyCustody

Two Concerns with the new rule:Two Concerns with the new rule:

1)1)Advisers that withdraw their fees Advisers that withdraw their fees directly from client accounts.directly from client accounts.

2)2)Advisers relying on the PIMS No-Advisers relying on the PIMS No-Action Letter.Action Letter.

Amended Utah Rules

Direct Withdrawal of FeesDirect Withdrawal of Fees

SEC’s Kennedy No Action Letter will be SEC’s Kennedy No Action Letter will be rescinded by the Division.rescinded by the Division.

• Now, deemed to have custody.Now, deemed to have custody.

• However, if advisers have custody However, if advisers have custody solely for the withdrawal of fees, solely for the withdrawal of fees,

they are exempt from the surprisethey are exempt from the surprise audit and bonding requirements. audit and bonding requirements.

• See R164-4-5(F)(2).See R164-4-5(F)(2).

Amended Utah Rules

Relying on PIMS LetterRelying on PIMS LetterAmended Utah

Rules

SEC’s PIMS No Action Letter will be SEC’s PIMS No Action Letter will be rescinded by the Division.rescinded by the Division.

• Applied to a few advisers managing Applied to a few advisers managing pooled funds with an independent pooled funds with an independent party controlling withdrawals. party controlling withdrawals.

• Now considered to have custody.Now considered to have custody.

• Going forward, must bond and are Going forward, must bond and are subject to all custody requirements.subject to all custody requirements.

Increased Filing TimesIncreased Filing Times

For advisers with custody, the For advisers with custody, the amount of time to submit audited amount of time to submit audited financial statements has increased financial statements has increased from 90 to 120 days after the from 90 to 120 days after the adviser’s fiscal year end.adviser’s fiscal year end.

Amended Utah Rules

Reviewing the RulesReviewing the Rules

• View rules on the Division’s website.View rules on the Division’s website.

• Public comment period ends 11/15/10.Public comment period ends 11/15/10.

• Soonest effective date: 11/22/10.Soonest effective date: 11/22/10.

• Contact the Division with any questions Contact the Division with any questions or comments.or comments.

Amended Utah Rules

For more information, please callFor more information, please call (801) 530-6600(801) 530-6600