Texas Preparing for a Greater Role in Regulating Investment Advisers

December 23, 2010

Texas Securities Commissioner Denise Voigt Crawford reviewed the Texas State Securities Board’s preparation for the anticipated rise in the number of Texas-registered investment advisers. Currently, the Texas Commission has 25 positions in inspections and compliance.  It is structured so that everyone plays a role in administering, inspecting and, if need be, litigating in the investment adviser area. Another 12 people are involved in registration.  Additionally, it expects to add 10 new positions.

Texas and other states will have to pick up the burden of about 4,100 new investment firms, including hundreds more in Texas.

Currently, states examine investment advisers with less than $25 million of assets under management. Beginning next year, the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) moves firms with up to $100 million in assets under state jurisdiction. In Texas, that means doubling the current 1,200 firms overseen by the Texas State Securities Board to roughly 2,400.

The Dodd-Frank's $100 million threshold creates a new category of advisers called "mid-sized advisers." As a result of an amendment to the Investment Advisers Act, about 35 percent of the nation's 11,850 registered advisers will switch registration over to the states. The advisers will continue to be subject to federal anti-fraud provisions.

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Investment Advisers, Regulatory