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‘Tis the Season for Registrations

Thursday, December 12, 2019

The annual renewal season for firms has begun. It’s time to ensure that you and all representatives are registered appropriately in every jurisdiction needed. Unlike the proverbial lump of coal in your stocking for bad behavior, there are real consequences for operating in a jurisdiction and failing to register. You could also face penalties for registrations you no longer need. 

The Frugal Financial Floridan 

Let’s look at the case of Frugal Financial Retirement Plan Services, a Florida-based adviser firm. Between 2015 and 2019, Frugal Financial conducted advisory business in the state of Texas. Initially, they didn’t have to register as they met the state’s de minimis requirements. According to the Rules and Regulations of the Texas State Securities Board, an investment adviser doesn’t have to register in the state if they: 

1) Don’t have a place of business in the state and 

2) Had five or fewer clients in the past 12 months who are Texas residents. 

Between 2015 and April 2018, the Chief Compliance Officer (CCO) determined they met these requirements, hence no registration needed.  

In April 2018, things were getting sunnier in Florida, as Frugal Financial gained more than five clients that were residents of Texas. Unfortunately, the CCO didn’t recognize they now met the registration threshold and failed to register in the state of Texas. They continued to operate in Texas without registering for over a year. As a result of this oversight, they violated Section 12.B of the Texas Securities Act. That lump of holiday coal came in the form of a reprimand and a $5,000 administrative fine. 

Keep Your Compliance Merry and Bright

Red Oak highly recommends that you review your firm’s registration at least annually. If you operate in a state without being registered under a de minimis exemption, pay close attention to the requirements and register if and when you no longer meet that exemption. 

Red Oak can help ensure you are compliant with all states in which you have to register. For more information, please contact Red Oak Today.


About Red Oak Compliance Solutions

Red Oak Compliance Solutions is the global advertising review software of choice in the financial services industry. It is a comprehensive suite of SEC 17A-4 compliant features that are 100% books and records compliant and provides clients with 35% faster approvals and 70% fewer touches or better. We also offer Smart Review(SM), which solves for the storage and maintenance of disclosures, helping firms reduce risk, decrease review times, and increase the speed of distribution of marketing materials. Smart Registration(SM) automates the licensing and registration management process to help reduce regulatory risk and time spent on manual processes. Overall, Red Oak allows firms to minimize risk, reduce costs, and increase compliance review process effectiveness and efficiencies.