Maryland Securities Division Responds to Questioning, Part 3

After publishing our previous article on the preparedness of Maryland's Securities Division last week, we were finally contacted by the department and was able to get some answers about how the State was handling the upcoming rules change. We spoke with Melanie Senter Lubin, Securities Commissioner in the Securities Division at Maryland's Office of the Attorney General for our Q&A session.

Have you received inquiries from the industry since the Dodd-Frank Investment Adviser Act announcement requesting mid-small size IA firms to deregister with the SEC?

Yes, we have been getting inquiries for about a year and a half now.

How many IA firms, do you expect will deregister with the SEC and register in Maryland?

We expect, between 150-200 IA firms to register, with the state of Maryland.

What has Maryland done to inform the IA firms of the required registration?

We have had an outreach seminar in December, where we notified all of the advisers who we believe would undergo the deregistration process with the SEC and register with the state of Maryland.  We sent them letters about the process for state registration.  I have talked to numerous local and national groups about the switching provisions.  All kinds of things have been going on for the past year and a half. 

The responsibilities are ongoing, and we will continuously work with the switching IA firms between now till the end of June, when the registration process should be done. 

What information/materials do you have available for IA firms?

We have some information on our website about the switch, and registration process.

Does Maryland have enough manpower to handle the amount of inquiries and registration?

We have allocated resources and have changed some things around in order to make sure we have the capability to handle the expected influx of applications. 

Since, we have already made changes to deal with the influx; we do not foresee the need to hire anybody else at this time.

How many examiners do you have altogether?

We have a lot of people who overlap responsibilities.  Overall, the securities division contains twenty personnel.

What about inspections?  We have heard from many IA firms that prior to this new rule majority of states and SEC were not as active in the examination process.  Do you believe that this will continue or should the IA community expect a visible presence from Maryland? 

I think the mid-size advisers that are switching should expect to see the states more than they did the SEC. 

Do you collaborate with the adjoining states; Virginia and DC?

Yes, we all coordinate through the NASAA organization.  Our examiners will talk to each other when they look at the applications.  There have always been advisers that were functioning in Maryland, Virginia and DC, and we have always coordinated with each state and district; whether it was reviewing applications, amendment applications, or going out on audits. 

We anticipate continuing collaborations going forward.

What should the IA firm look forward to from MD as soon as they register?

They should know that at least their documents are already in order, and in compliant with our regulations before they are registered.

We review all of their documents; disclosure documents, part one and two of form ADV, client’s contracts, and we make sure that all those things are in compliant with our inspection regulations.

So advisers can expect, before they are registered with Maryland, their paperwork that have been submitted to us have all gone through a review in compliant with the statue.

Have funds been allocated to hire more individuals to help with this process?

This has been in place for a while, and we have already allocated resources to handle the workload.

Finally, looking forward what valuable advice would you provide to IA firms regarding Maryland’s involvement in this new regulation?

Apply for registration as soon as they possibly can.  The deadline for switching is June 30, but the sooner they get their application in and their registration in place, the better.  At this point since their deadline for deregistration with the SEC is March 30th; they should be in the process of getting their paperwork in order before they are obligated, under the federal law, to withdraw as a SEC adviser.

Second, get in touch with us; if they have questions about what the process is, or what they are supposed to be doing.

Don’t think this is as daunting as you heard.  A lot of the advisers who have gone through this process have realized that it’s not as hard as they think it will be.  In fact, some people have realized it’s a lot easier than they expected.

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