Investment Advisers: Overview

By law investment advisers must be registered in New Mexico to do business here.  Dealing with an unregistered seller or advisor greatly increases the risk of harm to you as an investor.  To check whether a firm/individual is licensed as an investment adviser/representative in New Mexico; for firms, visit  FINRA BrokerCheck, for representatives visit,  IARD for investments advisers.  To review the history of disciplinary actions involving an investment adviser and their representatives, visit the FINRA Disciplinary Actions Online Database..

Examinations are conducted of state-registered investment advisers and of their offices on a regular basis and/or in response to complaints from investors or from Enforcement.

By signing the Dodd-Frank Wall Street Reform and Consumer Protection Act into law, President Obama set in motion a change for many mid-sized investment adviser firms.  Under the law, approximately 4,000 Investment advisers with assets under management of less than $100 million will switch from federal to state regulation by July 21, 2011.  Please click here New Mexico Securities Division State IA Switch Presentation on how to make that switch.

For more information on investing click on these links:

http://www.nasaa.org/

http://www.sec.gov/

http://www.finra.org/index.htm

Contact:  

505.476.4592

Richard Dominguez - Compliance Officer

richard.dominguez@state.nm.us

or

505.476.4584

Rosemarie Ulibarri - Compliance Manager

rosemarie.ulibarri@state.nm.us

IMPORTANT NOTICE:

AVOIDING COMMON DEFICIENCIES FOUND IN INVESTMENT ADVISER APPLICATIONS

The Compliance Officer is responsible for reviewing and issuing comment letters to those persons who apply for registration as investment advisers and investment adviser representatives. Avoiding common deficiencies when preparing Form ADV Parts 1 and 2 and investment advisory agreements will help speed up the review of your application.

The most common errors found in an application are related to inconsistencies between Part 1, as filed on the IARD system; the new "plain language" narrative Part 2; and the investment advisory agreement/contract.

Form ADV, Parts 1 and 2

To avoid the most common deficiencies, please follow these guidelines:

• Ensure:
  1. The types of clients listed on Item 5.D of Part 1 match Item 7 of Part 2.A.
  2. The type of compensation listed on Item 5.E of Part 1 matches Item 5 of Part 2.A.
  3. The fee schedule listed in Item 5 of Part 2.A matches the fee schedule in the investment advisory agreement/contract.
  4. How often fees are paid as listed in Item 5 of Part 2 matches the investment advisory agreement/contract.
  5. Services marked in Item 5.G of Part 1 match the services described in Item 4 of Part 2.A.
  6. Discretionary authority marked in Item 8.C of Part 1 matches the discretionary authority described in Item 16 of Part 2.A.  Additionally, you must discuss the restrictions or limitations imposed by your clients.
• If you list other business in Item 6 of Part 1, discuss the other business in Item 10 of Part 2.A.
• In part 2, do not state that you are "registered with the U.S. Securities and Exchange Commission" or "registered under the Investment Advisors Act of 1940."
• If you are registering or registered with one or more state securities administrators and you receive more than $500 in fees per client six months or more in advance, include both the required balance sheet and financial condition disclosures for Items 18.A and 18.B of Part 2.
• Update references in the investment advisory agreement from the "ADV Part II" to the newly adopted "ADV Part 2."

Investment Advisory Agreements

In addition, the Compliance Officer also review and comment on the applicant's investment advisory agreement(s). To avoid deficiencies, please follow these guidelines:

• The following items should be discussed in the agreement and should be consistent with the information found in Form ADV Parts 1 and 2 and pursuant to 12.11.7.10 NMAC:
  1. A description of services to be rendered by the adviser;
  2. a fee schedule;
  3. whether fees are charged in advance or in arrears;
  4. how often fees are paid;
  5. whether fees are negotiable;
  6. whether fees are withdrawn from the client's account;
  7. the firm's termination policy; and
  8. refund policy, if applicable.

• The agreement should also include language the client acknowledges receipt of Part 2 of Form ADV and advise the client  of their right to receive the disclosure statement (i) not less than 48 hours prior to entering into any written or oral investment advisory contract with such client or prospective client, or (ii) at the time of entering into any such contract, if the advisory client has a right to terminate the contract without penalty within five business days after entering into the contract, pursuant to Rule 203-3 of the Investment Advisers Act of 1940.   
• The fee schedule in the agreement must match the fee schedule discussed in the Form ADV Part 2. Additionally, the type of compensation described in the contract must match what was described in Item 5 of Part 2.A and the form of compensation marked in Item 5.E of Part 1.