Thursday, February 4, 2021

The final stage of the annual renewal process is your fiscal year end filings. As your investment adviser’s fiscal year end is December 31, your filing due dates are:

Action Item Where/To Whom Action Due Date
File Form ADV Parts 1 & 2 IARD March 31, 2021
Deliver or Offer Form ADV 2 Clients April 30, 2021
File GAAP Balance Sheet ialicensing@dfi.wa.gov April 30, 2021
File Fund Audit (Private Fund Only) ialicensing@dfi.wa.gov April 30, 2021

Form ADV Part 1

You are required to file an annual updating amendment.1 This is required even if there have been no changes since your last filing. In order to ensure that the Form ADV Part 1 has been updated properly, please ensure that you have passed the “Completeness Check” and “Submit Filing.”

If your firm conducts business at locations other than your principal office, the Securities Division requires that you also submit a Form BR listing these locations.2


Form ADV Part 2 (Brochure)

You must confirm the accuracy of your current Form ADV Part 2 or file an updated version. You are required to update Form ADV Part 2 each year at the time you file your annual updating amendment if there are any changes. For example, if your assets under management have changed, you must update your Part 2. If there have been no changes, you must attest to the accuracy of your Part 2 by clicking on the “Brochure ID” to verify that the Brochure on file is up to date, select the “Confirm” radio button, and then click on “Save.”

If there have been material changes to your Form ADV Part 2, you are required to, without charge, annually deliver (or offer, in writing, to deliver upon written request) to each of your clients the Form ADV Part 2. This must include a summary of material changes. This delivery may be done electronically for those clients that have opted to receive communication from the investment adviser via electronic delivery in the investment advisory agreement. Please note that evidence of the annual offer or delivery must be maintained by the investment adviser.

Form ADV Part 2 must also be updated throughout the year within 30 days whenever any information in the Brochure becomes materially inaccurate. Please see the general instructions for ADV Part 2 and WAC 460-24A-145 for additional information.

The investment advisory rules WAC 460-24A-106(1)(b)(ii) and WAC 460-24A-135 were updated to clarify that all investment advisers that receive fees from clients must provide an invoice each time a fee is collected. As a result, the Securities Division asks that the following disclosure be included in Form ADV Part 2 Item 5 stating, “Adviser will send the client a written invoice, including the fee, the formula used to calculate the fee, the fee calculation itself, the time period covered by the fee, and, if applicable, the amount of assets under management on which the fee was based. Also, the Adviser will include the name of the custodian(s) on your fee invoice. The Adviser will send these to the client concurrent with the request for payment or payment of the Adviser’s advisory fees. We urge the client to compare this information with the fees listed in the account statement.”

In addition, investment advisers that charge performance fees must also state, “the fee invoice will also include the client’s cumulative net investment gain (or loss), and the amount of cumulative net investment gain above which the Adviser will receive performance compensation. Also, the Adviser will include the name of the custodian(s) on your fee invoice. The Adviser will send these to the client concurrent with the request for payment or payment of the Adviser’s advisory fees. We urge the client to compare this information with the fees listed in the account statement.”


Balance Sheet with Written Attestation

You are required annually to submit the investment adviser’s balance sheet dated as of the last day of your most recent fiscal year end to the Securities Division. The balance sheet must be prepared in accordance with Generally Accepted Accounting Principles (GAAP) with a written attestation that your balance sheet is true and complete to the best of your knowledge upon submission. This written attestation can be attached to your balance sheet or in the body of your email submission to the Division. Please see WAC 460-24A-170(5) for items that will be excluded as assets for purposes of determining the investment adviser’s minimum financial requirement.

If your principal place of business is located in the State of Washington, your minimum financial requirements are as follows:

  • If you have custody of client funds or securities, you must maintain at all times a net worth of at least $35,000;
  • If you have discretion, you must maintain at all times a net worth of at least $10,000; or
  • If you have neither discretion nor custody, you must maintain a positive net worth.3

Please note that the Securities Division may request your income statement, statement of cash flows, statement of owner’s equity, and trial balances to support and/or verify the information on the investment adviser’s balance sheet.

If you have custody, absent an exemption, your firm’s balance sheet will need to be audited by an independent certified public accountant and must include the accountant’s audit opinion. 4

If you utilize a bond to meet your minimum financial condition, please submit a copy of the bond renewal confirmation from the insurance company.

If your firm manages a private fund(s), you are required to submit a copy of the annual fund audit(s) within 120 days after the Fund’s fiscal year end.5


Warning to Late and/or Non-Filers

Investment advisers who fail to file the required documents within the due dates following their fiscal year end can expect to be referred for administrative action, which may include suspension or revocation of your license(s) and fines.


No Longer in Business

If your firm is no longer intending on providing investment advisory services, please file a Form ADV-W to request withdrawal of your investment adviser registration. Instructions on filing Form ADV-W can be found here: https://www.iard.com/advw_instructions. The Securities Division must receive this document to properly close your investment adviser licensing file.


Resources and Contact Information

IARD Information Resource
Help & Training https://www.iard.com/help-training
Form ADV Part 1 http://www.iard.com/part1instructions.asp
Form ADV Part 2 http://www.iard.com/part2instructions.asp
Form BR http://www.iard.com/uniform_branch_office_registration_form.asp
IARD Call Center (240) 386-4848
Securities Division Information Resource
Website http://dfi.wa.gov/investment-advisers
General Mailbox IALicensing@dfi.wa.gov
General Questions (360) 902-8815
Pooled Investment Vehicles/Private Fund Advisers (360) 902-8786

Reminder

As announced in 2018, the Securities Division is no longer automatically sending renewal and filing notices via hard copy. We will continue to send communication via email and post notices on our website at http://dfi.wa.gov/investment-advisers.

If you have any questions or would like to receive hard copy notices, please contact us at IALicensing@dfi.wa.gov or (360) 902-8815.


1 Throughout the year, in general you must update Form ADV Part 1 within 30 days whenever information becomes inaccurate. Please see WAC 460-24A-205 and http://www.sec.gov/about/forms/formadv-instructions.pdf for additional information.

2 Branch offices may include home offices or satellite offices. Form BR is filed through your firm’s account on the IARD system.

3 AC 460-24A-170

4 WAC 460-24A-060

5 WAC 460-24A-060(2) and WAC 460-24A-107