SEC To Increase Outreach Efforts With Newly Registered Firms

by Philip Morton, Investors Offshore

26 July 2007

The US Securities and Exchange Commission (SEC) on Tuesday announced that it will be sending all newly registered advisers a "welcome letter", along with a plain English summary of the key provisions of the Investment Advisers Act to help them understand their compliance responsibilities.

The goal is to help educate newly registered advisers about their compliance obligations that promote investor protection.

The SEC staff will send the "welcome letter" primarily by email. In addition to providing the plain English summary of the Investment Advisers Act, the letter also introduces the adviser to the local office of the SEC, provides information about the resources available on the SEC's Web site, and provides information about the SEC's CCOutreach Program to help chief compliance officers implement effective compliance programs.

Finally, it encourages the adviser to communicate with SEC staff with any questions.

Andrew J. Donohue, Director of the SEC's Division of Investment Management, explained that:

"The new adviser 'welcome letter' explains the key provisions of the Advisers Act in a straightforward, plain English manner. It will benefit advisers, and ultimately investors, because it provides important and helpful information to newly registered firms, early in their operations."

Lori Richards, Director of the SEC's Office of Compliance Inspections and Examinations, added:

"Our experience in examining newly registered advisers is that they will appreciate having more information about their compliance obligations under the Advisers Act. Understanding these provisions is the first step in healthy compliance for the protection of investors. Along with our CCOutreach Program, ComplianceAlerts, and other efforts, this is one further step in our efforts to help firms meet their compliance responsibilities."

Since January of 2005, approximately 3,200 advisers have registered with the SEC. Newly-registered firms now comprise approximately 30% of the total registered investment adviser population of about 10,500 advisers.

The number of new registrants is expected to increase. Historically, each year the SEC has received over 1,000 initial registration filings from investment advisers.

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