The following is a summary of some of the considerations United Kingdom-based financial professionals may have when registering as an investment adviser in the United States. Every client and registration is unique, so not every process can look the same. The information provided is not intended to be legal advice and is for general educational purposes only.
Registering United Kingdom-Based Investment Advisers in the United States
- Are you a financial services professional based in the United Kingdom seeking to expand into the United States’ market?
- Do you know if there is a registration requirement in the United States for investment advisers?
- How complicated is the investment adviser registration process?
- Do you understand the ramifications of registering as an investment adviser in the United States?
Definition of Investment Adviser
As a starting point, we consider who is an investment adviser under the Investment Advisers Act of 1940 (“Investment Advisers Act”). The term “investment adviser” is a defined as:
“any person [or entity] who, for compensation, engages in the business of advising others, either directly or indirectly or through publications or writings, as to the value of securities or as to the advisability of investing in, purchasing, or selling securities or who, for compensation and as part of a regular business, issues or promulgates analyses or reports concerning securities.”
As such, the definition consists of three elements:
- First, the person or entity must be engaged “in the business” of providing advice or of issuing analyses or reports concerning securities.
- Second, the advice, analysis, or report must be with respect to “the value of securities” or on the “advisability of investing in, purchasing or selling securities.”
- Third, the advice, analysis, or report must be provided in return for “compensation.”
A firm or person must satisfy all three elements to fall within the definition of an “investment adviser.” The Securities and Exchange Commission (the “SEC”) – the governmental entity in the United States assigned with the enforcement of the Investment Advisers Act – has explained that the Investment Advisers Act applies to financial planners, pension consultants and other persons who, as a part of some other financially related services, provide investment advice.
Assuming you or your firm meets this definition, we then turn our attention to who must register as an investment adviser under the Investment Advisers Act. This discussion will elaborate on prohibitions from registration with the SEC and the foreign private adviser exemption from registration.
When Must an Investment Adviser Register Under the Investment Advisers Act?
A firm or person that falls within the definition of an “investment adviser” must register under the Investment Advisers Act, unless:
- they are prohibited from registering under the Investment Advisers Act because they are a smaller firm regulated by one or more states, or
- they qualify for an exception from the Investment Advisers Act’s registration requirement.
Note that all advisers, registered or not, are subject to the Investment Adviser Act’s anti-fraud provisions.
Prohibition
Typically, an investment adviser is prohibited from registering with the SEC unless that firm manages a minimum amount of client assets. In other words, smaller advisers are generally prohibited from registering with the SEC, but instead, must register with state securities regulators. That being said, investment advisers whose principal office and place of business are outside the United States (like in the United Kingdom) are not prohibited from registering with the SEC, and thus are not subject to the assets under management thresholds. A United Kingdom-based investment adviser giving advice to United States persons must register with the SEC (doing so, they may avoid registration, but not notice filing, with state regulators), unless an exemption from registration is available (in which case it may be subject to state registration requirements).
Exemption
As noted above, an investment adviser that is eligible for registration with the SEC (i.e. not prohibited from SEC-registration) may nonetheless fall within certain exemptions from the registration requirements. For investment advisers located in the United Kingdom the “foreign private adviser exemption” is most likely to apply. The foreign private adviser exemption is available to United Kingdom investment advisers that:
- have no place of business in the United States;
- have, in total, fewer than 15 clients in the United States and investors in the United States in private funds advised by the investment adviser;
- have aggregate assets under management attributable to these clients and investors of less than $25 million; and
- generally, do not hold themselves out to the public in the United States as an investment adviser.
Note that just because you may be exempt from registering as an investment adviser in the United States that does not necessarily mean you want to. As we will discuss later, registering as an investment adviser may have significant benefits with the SEC.
Investment Adviser Registration with the SEC
As discussed above, many non-U.S. investment advisers with relatively small numbers of clients can elect to remain exempt from SEC registration. However, United Atlantic Legal Services (“UALS”) finds that many non-U.S. investment advisers who meet this exemption may waive the exemption and elect to register (as they are not prohibited from registering, as discussed above). These non-U.S. investment advisers typically find that attracting investors (particularly large institutional investors) becomes easier when they are able to tell those investors that there is a layer of regulatory oversight.
However, there are several additional considerations that non-U.S. investment advisers will want to look at when contemplating registration in the United States.
The registration process can be surprisingly complicated and nuanced. Begin by considering if you meet the definition of an investment adviser in the United States. Then, look at whether registration with the SEC is required (or preferred). In the next section, we discuss UALS’s Adviser Launch Process which can help you through the entire investment adviser registration process with the SEC.
Conclusion
How can UALS help you through the investment adviser SEC-registration process? UALS has created its Adviser Launch Process to provide United Kingdom-based financial services professionals with efficient, transparent, tailored investment adviser registration solutions. You can learn more about our process by visiting our website at: www.unitedatlanticls.com.
About Our Founder
Michael Rasmussen is the founder of United Atlantic Legal Services. He is a licensed attorney in Florida and registered solicitor in the United Kingdom. Michael has acted as General Counsel and Chief Compliance Officer to several investment advisers, including private fund managers, responsible for the management of billions of dollars in client assets.
Michael is also the founder of FinProLaw, an online learning platform where Michael has created several courses designed for investment adviser compliance professionals. These courses include:
- Investment Adviser Compliance Essentials for Chief Compliance Officers
- Investment Adviser Registration
- Foundations of Investment Adviser Compliance
- What is a “Security”?
- Investment Adviser Marketing Rule
- Regulation A – Exemption from Registration
- Regulation Crowdfunding – Exemption from Registration
- Regulation D – Exemption from Registration
Investment adviser firms who are also clients of United Atlantic Legal Services can receive many of these courses at a significantly reduced fee or, in some cases, at no expense. Contact us today or visit the FinProLaw website to learn more.
Please visit Michael’s website to learn more about Michael and his insights into the investment adviser industry. To learn more about Michael, head over to his LinkedIn.