This year alone, the Texas State Securities Board has fined 4 Registered Investments Advisers (RIAs) for providing investment advice to Texas based clients without a proper registration or state notice filing. We would like to remind clients that they need to be registered or notice filed in Texas before they can offer advisory services to clients or prospective clients domiciled in Texas. Since Texas does not have a de minimis exemption for investment advisers, a filing is required before the RIA starts advising its first Texas based client.
The states of Texas and Louisiana do not offer a client de minimis exemption from registrations or notice filings for firms and individuals regardless of whether the firm or individuals maintain a place of business in those states. For SEC firms, a firm notice filing is required; and, Investments Adviser Representative (IAR) registrations are required for individuals working with Texas and Louisiana clients.
For state registered firms, Texas is unique in that it allows out-of-state advisers with no IARs located in Texas to have up to five clients/prospects by filing a restricted (limited) registration filing along with IAR registrations for individuals working with Texas clients. However, before a firm with a restricted (limited) registration can have a sixth client, it must transition to a full registration in Texas.
If you are notified that a client is relocating to Texas or Louisiana, please make sure the appropriate filings are made immediately. If you currently have a restricted (limited) registration in Texas, please be sure you transition to full registration prior to the sixth client or prospect.
Note: For SEC advisers, New Hampshire and Nebraska also require notice filings regardless of how many clients or place of business.
We strongly advise you implement a procedure for monitoring client/prospective client activity by state on an ongoing basis to avoid costly registration violations that also result in regulatory disclosures.
About RIA Compliance Group: RIA Compliance Group is an investment adviser compliance consulting firm based in Delray Beach, Florida. The firm’s mission is to provide affordable, timely, practical, and cost-effective compliance advice. We help investment advisers to comply with the myriad of state and SEC regulations and compliance obligations facing their firms. RIA Compliance Group takes pride in giving personal service and real world compliance advice, not theoretical concepts and legalese. The firm interacts on a daily basis with SEC and state securities regulators.
RIA Compliance Group, LLC – 701 SE 6th Ave, Suite 201, Delray Beach, FL 33483 – Tel: 561-600-0564 – firstname.lastname@example.org.