If you're starting an investment advisory firm, it's essential to note that the requirements for RIA registration can vary by state. This article will cover the specific requirements for registering in the state of North Carolina.
Who is required to register as an RIA in North Carolina?
Generally, investment advisors with less than $100 million in assets under management (AUM), serving more than 5 clients in the state, located in North Carolina, or actively marketing their services in the state, are required to register as an RIA.
Key Takeaways from this article:
Hiring a compliance consultant can help prevent clerical errors and provide peace of mind. If this isn't an option, it's important to understand the financial statement and document requirements for registering in North Carolina.
Many states require advisors to meet certain licensing requirements or hold specific designations, such as the Series 65, Series 66, and Series 7 combined, or a CFP, CFA, CIC, CHFC, or PFS designation.
Each investment advisor representative (IAR) must submit Form U-4 and ADV Part 2B.
Financial statement requirements for RIAs in North Carolina:
Registered investment advisors (RIAs) who have discretion over or custody of client funds must submit a balance sheet. In addition to these requirements, each advisor must submit the Form U-4 and ADV Part 2B.
Required to pass Series 65, Series 66 & 7 combined or have the appropriate designation
To register in North Carolina, advisors must meet certain licensing requirements. These enable financial professionals to become licensed advisors or planners in the state:
Series 66 and 7 combined
Or have CFP, CFA, CIC, ChFC, or PFS designation
Forms & Policies required by North Carolina
Filing with Finra
To file an application as an RIA, firms must apply to FINRA for an account to their WebCRD/IARD online system. The state of North Carolina uses this system to process RIA registration applications, but RIAs are not regulated or supervised by FINRA.
In addition to the FINRA entitlement paperwork, firms must pay all state of North Carolina registration filing fees and complete the following documentation:
Form ADV Part 1 (online portion)
This form is the online component of a firm's registration documentation. It primarily discloses information about the firm, while individual information is disclosed in the Form U-4. Form ADV Part 1 is also used to upload the firm's Form ADV Part 2A (firm brochure) and Form ADV Part 2B (brochure supplements).
Form ADV Part 2A (paper and online)
This form acts as the firm's brochure and must be given to clients and prospects. It details the firm's fees, services, disciplinary disclosures, and additional information about the firm. The state requires it to be written in plain English, so clients can easily understand it.
Form ADV Part 2B (paper and online)
This is the paper brochure that must be given to clients. It contains information about the advisor's education, employment, conflict of interest, and disciplinary information. Also, executive officers, anyone responsible for generating investment advice, or any representative advising clients must also have a Form ADV Part 2B.
Client Advisor Contract
RIAs must have a client advisory contract with an investment policy statement that meets the appropriate regulatory authority standards in North Carolina.
Policies and Procedures Manual
This manual outlines an RIA's internal policies on all aspects of their business, including handling client complaints, training new IARs, and more. Also included are details about the firm's information security policy, anti-money laundering policy, business continuity plan, and anti-insider trading policy.
Firms must provide this to clients at the start of the relationship and every year following. It is required that firms explain how the client's information is stored, handled, and disclosed. It must also meet the state's compliance requirements.
Code of Ethics
North Carolina requires that RIAs meet the state's code of ethics standards.
It can seem daunting to start an RIA in North Carolina. However, the process can be made much easier with the right resources. If you want to learn more about starting an RIA in North Carolina, you may find downloading our comprehensive launch kit helpful.
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