Starting an RIA in Alabama requires advisors to follow specific rules and regulations. This article will explain what those are.
If you meet the following criteria, you must register your RIA with the state of Alabama: Your firm is in the state, you manage less than $100 million in AUM, you solicit your financial services in the state, or you are managing assets for more than five clients that are Alabama residents.
To help make this process smoother, consider hiring a compliance consultant.
Alabama requires one of the following professional designations to operate an RIA: Series 65, Series 7 & 63, CFP, CFA, CIC, ChFC, MSFS, or PFS.
Advisors must complete and submit the following forms and policies to start an RIA in Alabama:
In addition to paying all the registration and filing fees, IARs must complete the following tasks and submissions with the state:
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Submit FINRA Entitlement Paperwork
Alabama uses FINRA’s WebCRD/IARD online system to process applications. As a result, advisors will need to apply for an account to access FINRA’s system. Keep in mind FINRA doesn’t regulate or supervise RIAs. -
Form ADV Part 1 (online only)
Form ADV Part 1 will have information related to the RIA only. This includes ownership, clients, business practices, disciplinary events related to the advisor or its employees, and any affiliations. Since Form ADV Part 1 is the online portion, it is also used to upload ADV Part 2A and ADV Part 2B. -
Form ADV Part 2A (paper and online)
In this section, advisors share information about the RIA’s services, fees, disciplinary disclosures, and any information the client needs to know about the firm. It’s also known as the Firm’s Disclosure Brochure, and it’s required that this is given to prospective and current clients and must be easy to read and understand. -
Form ADV Part 2B (paper and online)
Advisors will share information about themselves in Form ADV Part 2B. Advisors must disclose their education, employment history, potential conflicts of interest, and any disciplinary actions. Executive Officers or representatives who advise clients must also complete this form. This brochure is often given to clients.
If sponsoring a wrap fee program, Appendix 1 is also required. -
Form U4
This form registers your firm’s Investment Adviser Representatives (IARs).
Financial statements & other documents
A surety bond of $50K is required if an RIA either maintains custody of client funds or securities, has discretionary authority over client accounts, or does not maintain a minimum net capital of $10,000. If maintaining custody and/or discretionary authority, a statement as such must also be provided. The state also requires a balance sheet that must be independently audited, dated within 90 days before filing, and follow GAAP principles. An oath by an authorized officer is also required, in addition to the balance sheet, that states “such statement is true and correct to the best of their knowledge, information, and belief.” A list of number and type of clients, and all representatives who will be conducting business in Alabama is also required.
Alabama may also require the following documents and processes:
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Client Advisory Contract
This filing ensures that the RIA meets the regulatory standards for client advisory contracts set by the state of Alabama.
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Privacy Policy Statement
Every RIA must have a Privacy Policy Statement and disclose how the firm handles, stores, and discloses client information. It’s given to clients at the start of the working relationship and every year after that. While this statement will be unique to each firm, it must still meet the state’s compliance requirements. -
Policies and Procedures Manual
This manual is an internal document that RIA’s will use to maintain their internal processes and procedures. It must have information from how the RIA handles client complaints to how it trains new IARs. Also required to be included is information on Business Continuity, Anti-Money Laundering, Information Security, and Anti-Insider Trading plans. -
Code of Ethics
This filing confirmed the RIA is meeting the specific fiduciary standards set forth by Alabama.
Starting an RIA doesn’t have to be overwhelming with the right resources, such as our comprehensive RIA launch kit.
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To see how we’re helping RIAs streamline operations, reduce overhead, and elevate the client experience, book a call with one of our transitional specialists now.
*Altruist and its affiliates do not provide legal advice, so it’s important to check with a qualified professional for each state’s registration requirements.
