Registered Investment Adviser Entity Formation, Registration and Employment Transition Checklists

I have assisted numerous financial industry professionals with their transition from the wire-house channel to operating as independent investment advisers. To do so takes experience, legal know-how, preparation, and patience. While other compliance companies can offer to register an investment adviser for a very small fee, I always caution prospective clients to be wary of going that route. Below is a sample checklist that I prepared and relied on for a recent wire-house breakaway and registration with the U.S. Securities and Exchange Commission. As you will see, registration is just one small piece of the equation. With all of the legal elements of registration and operating an investment adviser, do you really want to try and cut corners and costs on what will presumably be your biggest career decision?

TaskAssigned ToDate PerformedNotes
Formation of Entity   
Name Selection   
Entity Selection   
Name Registration (state-wide and trademark)   
Entity Formation   
Obtain tax identification number   
Prepare Operating Agreement   
Designate registered agent   
Elect “S” Corporation Tax Status by filing Form 2553, if desired (within 75 days)   
Registration of Investment Adviser   
Review firm and “advisory affiliate” disqualifications, as applicable (Item 11 of Form ADV Part 1A)   
Request Entitlement through FINRA   
Determine state, federal or exempt reporting adviser registration status   
Prepare Draft Form ADV Part 1A   
Appoint Chief Compliance Officer   
Determine “Custody” Requirements (surprise examination, financial statement audit, etc.)   
Prepare Draft Brochures   
A. Form ADV Part 2A   
B. Wrap Fee Brochure   
C. Part 2B (Brochure Supplement)   
Initial Draft of Policies and Procedures   
A. Compliance Manual   
B. Code of Ethics   
C. Business Continuity Plan   
D. Privacy Notice/Policy   
E. Information Security Policy/Cybersecurity Policy   
Determine initial licensing of “investment adviser representatives”   
Determine initial state notice filings and reporting by exempt reporting advisers   
Draft initial Investment Advisory Agreement(s), Financial Planning Agreements and Solicitor (referral) Agreements   
Submit initial application of Form ADV (if registering with the SEC, begin the 45 day clock for approval)   
File initial Form-U4s, as applicable   
Establish appropriate procedures for preparation and maintenance of “books and records” under Rule 204-2   
Review any performance advertising, sales literature and marketing materials (including website content and social media sites)   
Receive Registration Approval   
Analyze and update registration as needed within 120 days if relying on Rule 203A-2(c)   
Employment Transition Issues   
Review employment agreements for potential non-compete, non-solicit and “garden leave” issues   
Analyze state law to determine whether provisions are enforceable   
Review departing and “new” RIA for potential Protocol for Broker Recruiting compliance   
Advise client on transition risks, including potential for temporary restraining orders   
Formulate transition plan with client (enforceability of confidentiality provisions in employment agreement and inability to take certain client information)   
Prepare resignation letters   
Prepare and submit Joinder Agreement to Protocol for Broker Recruiting, if required   
Submission of resignation(s)   
Client transitioning   

You should not rely on this checklist as this was a highly customized checklist that was prepared for a specific engagement. This should not be relied upon as legal advice. Not for distribution or commercial use.

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