To register your RIA in Hawaii, you must follow specific requirements set by the state. This article will explain what those are.
In Hawaii, if you meet the following criteria, you must register your RIA with the state:
- The RIA is located in Hawaii
- You’re soliciting your financial services in Hawaii
- You’re managing less than $100 million in AUM
- You’re managing more than five state residents
If you’re unsure how to set up your RIA properly, consider hiring a compliance consultant to help guide you.
Hawaii requires that advisors have one of the following professional designations: Series 65, Series 7 (or job-specific equivalent FINRA exam[s]) & 66, CFP, CFA, CIC, ChFC, or PFS.
In addition to paying all the registration and filing fees, IARs must complete the following tasks and submissions in Hawaii:
Submit FINRA Entitlement PaperworkHawaii requires IAs to register for an account to FINRA’s Web CRD/IARD system. While FINRA will not supervise or regulate your RIA, the state uses its system to process applications.
Form ADV Part 1 (online only)In Form ADV Part 1, you’ll disclose information about your RIA’s ownership, clients, business practices, disciplinary events related to the advisor or its employees, and any affiliations. Form ADV Part 1 is also used to upload ADV Part 2A and ADV Part 2B.
Form ADV Part 2A (paper and online)In Form ADV Part 2A, you’ll describe your RIA’s fees, services, disciplinary disclosures, and other information related to the firm. Remember that this is also your firm’s Disclosure Brochure and must be given to prospective and current clients. Hawaii requires that it be in simple English that's easy to understand.
Form ADV Part 2B (paper and online)Form ADV Part 2B; you will disclose information about yourself, including your educational background, employment history, potential conflicts of interest, and any disciplinary actions.
If you have any Executive Officers or representatives that advise clients, they will also need to complete this form. Since this is also a brochure for clients, it must be written in plain English that’s easy to understand.
If sponsoring a wrap fee program, Appendix 1 is also required.
Form U4You will use Form U4 to register Investment Advisor Representative (IARs).
Client Advisory ContractThe state has set regulatory standards for client advisory. The RIA must submit the Client Advisory Contract to show that it follows the requirements.
Financial & Bonding requirements
Annual financial statementsIf your RIA will have custody or discretionary authority over client funds and you’ve been in business one year or more, an audited financial statement as of the last fiscal year is required. If you do not have custody or discretionary authority over client funds, financial statements that have been verified by an officer of your firm and notarized are required. The Investment Adviser Verification Form is available on the state’s website.
Month-End balance sheetA balance sheet with an “as of” date within thirty (30) calendar days of the filing, verified by a duly authorized officer (or the equivalent) is also required, and it must be notarized.
Bond requirementIf your RIA will have custody of or discretionary authority over client funds or securities, a bond in the amount of $50,000 must be obtained. The bond must be issued by a surety company qualified to do business in Hawaii, with the State of Hawaii named as obligee. The Investment Adviser Bond Form is also available online.
Minimum net worthRIAs with their place of business in Hawaii must maintain a minimum net worth of $5,000 if the firm does not have either custody or discretionary authority. If the firm has discretionary authority (but not custody), the minimum is $10,000. If the firm has full custody, the minimum is $35,000.
AffidavitThe state of Hawaii requires applicants to complete an Investment Adviser Affidavit Form, found on its website.
If you’re seeking approval as a state RIA for the first time, you will need to complete the following:
- SAA Creation & FINRA Entitlement
- IARD/CRD Access & Authentication
- E-billing establishment & processing
The state of Hawaii may also require the following:
Policies and Procedures ManualYour RIA must have a Policies and Procedures Manual describing your firm's operational plans. It should include how you train new IARs to how your firm handles client complaints. Also included are Business Continuity Plans, Anti-Money Laundering, Information Security, and Anti-Insider Trading Plans.
- Code of Ethics
The state of Hawaii has specific fiduciary standards that RIAs must meet. By filing this, you ensure you’re meeting those standards.
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*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.