Tuesday, February 8, 2022

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, 2022
Deliver or Offer Form ADV 2 Clients April 30, 2022
File GAAP Balance Sheet ialicensing@dfi.wa.gov April 30, 2022
File Fund Audit (Private Fund Only) ialicensing@dfi.wa.gov April 30, 2022

Form ADV Part 1

You are required to file an annual updating amendment. 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.

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 of when 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.

Please add this disclosure if it is not already included in Form ADV Part 2 Item 5.

Balance Sheet with Written Attestation

You are required annually to submit to the Securities Division the investment adviser’s balance sheet dated as of the last day of the most recent fiscal year end . 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 are 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.

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 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.

If you utilize a bond to meet your minimum financial requirement, 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.

Electronic Financial Information Filing System (eFIN)

The Securities Division is excited to announce the launch of our new electronic financial information filing system (eFin). eFin is a portal for registered investment advisers to file the financial reporting documents required by WAC 460-24A-060 including balance sheets, surety bonds, fund audits, subordination agreements, and other related documents. Going forward investment advisers will file these documents in eFin instead of emailing them to the Securities Division as was previously done. Additional information regarding this system has been sent in a separate communication via e-mail and mail to all state registered investment advisers.

Instructions on how to access the eFin system were sent prior to the New Year via mail to all Washington State registered investment advisers. Please contact the Securities Division if you did not receive this information or if you need your firm’s access code. If you have already filed your annual financials through the electronic filing system (eFin), please disregard this notice.

You can access the eFin system using the Secure Access Washington (SAW) website found at https://secureaccess.wa.gov/myAccess/saw/select.do.

For instructions on how to file using the eFin system, please see the eFin instruction manual.

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 Resources
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