The Dodd-Frank Act has passed at least one test, as the North American Securities Administrators Association announced that there was “little difference in the type or frequency of deficiencies between existing state investment and those advisers who switched from federal to state oversight.” Without getting into the quality of existing regulations or the Dodd-Frank Act, an entirely different discussion, this shows that regulators have done a good job of communicating changes to advisers forced to make the switch.


“This demonstrates that states and NASAA worked hard to inform and educate switching advisers before and during the switch,” said Heath Abshure, NASAA President and Arkansas Securities Commissioner.

Dodd-Frank Act affects on investment advisers

Part of the Dodd-Frank Act forced 2,100 investment advisers managing between $30 million and $100 million in assets to come under state instead of federal oversight this year, and there had been concerns that the change would cause widespread confusion. However, that doesn’t seem to have been the case. The NASAA report is conducted every two years to identify common problems and recommend solutions. This year, the examiners also noted who had previously been under state supervision and who had been moved by Dodd-Frank, and found little difference.

Of course, investment advisers also had to take an active role in learning about the new regulatory systems affecting them, and supervisory agencies shouldn’t be allowed to take all the credit. The NASAA survey also doesn’t attempt to measure the cost or benefits of the transition, only how well people new to state supervision have managed.

Common deficiencies

The NASAA also reported that the most common deficiencies for this class of adviser (more than $30 million AUM) were books and records, registration, contracts, advertising, and fees. More specifically, there were problems with suitability documentation, missing client contracts, and improper fee execution among others. Smaller investment advisers, those with less than $30 million AUM, also had issues with their privacy policies and brochure delivery.

Based on the results of the study, the NASAA recommends that investment advisors, “Prepare and maintain all required records, including financial records. Back-up electronic data and protect records. Document checks forwarded,” and “Review and revise Form ADV and disclosure brochure annually to reflect current and accurate information.”