What Triggers the Need to Transition from ERA to RIA Status?
An Exempt Reporting Adviser must transition to registering with the SEC the sooner of (a) when they exceed $150 million in private fund regulatory assets under management (RAUM) or (b) when they begin advising non-private fund clients.
ERAs with $150 million or more in RAUM must register with the SEC within 90 days of their fiscal year end. ERAs who are considering offering services to non-private fund clients should register before the commencement of these services.
What Are the Key Steps Involved in Transitioning from ERA to RIA?
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Evaluate Registration Requirements: Determine if your firm qualifies as a state or SEC-registered RIA based on RAUM and business scope. ERAs that are required to register due to meeting the $150 million RAUM threshold must register with the SEC
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File Form ADV: ERAs transitioning to fill registration must complete all relevant parts of Form ADV, including Part 1A and development for the narrative brochure (Form ADV Part 2A), which includes detailed disclosures about your advisory business, fees, and conflicts of interest
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Develop and Implement Policies: Establish compliance policies and procedures reasonably designed to prevent violations of the Advisers Act, tailored to your firm's business model operations
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Appoint a Chief Compliance Officer (CCO): Designate a qualified individual responsible for administering your firm’s compliance program
What New Compliance Obligations Will RIAs Face?
RIAs are subject to all provisions of the Advisers Act that are relevant based on their business model and the services they provide, including but not limited to:
- Books and Records: Maintaining accurate and comprehensive records as required by regulatory authorities
- Code of Ethics: Implementing a code of ethics outlining standards of conduct and personal trading policies
- Compliance Program: Conducting annual reviews of the firm's compliance program to ensure its adequacy and effectiveness
What Are the Common Challenges During the Transition?
- Regulatory Filings: Ensuring the accuracy and completeness of Form ADV and other disclosures with the firm’s actual practices, including offering documentation and marketing activities
- Compliance Infrastructure: Building and implementing a robust compliance framework that meets regulatory expectations
- Resource Allocation: Balancing day-to-day business operations with the demands of the transition process
What Resources Are Available to Assist with the Transition?
- Legal and Compliance Consultants: Engage professionals to guide you through the regulatory and compliance landscape
- Technology Solutions: Leverage compliance software to streamline recordkeeping, reporting, and monitoring
- Industry Associations: Join associations that advocate for investment advisers and private fund managers for access to resources and best practices
What Are the Key Differences Between ERA and RIA Registration Requirements?
ERAs have limited reporting obligations and are exempt from many regulatory requirements. RIAs must comply with the full scope of the Investment Advisers Act, including:
- Complete Form ADV Parts 1 and 2
- Implement a comprehensive compliance program
- Develop written policies and procedures
- Conduct annual compliance reviews
- Maintain detailed books and records
Can I Continue Operating During the Registration Process?
Yes, you can continue operating under your ERA status while your RIA registration is pending, provided you file within the required timeframes and respond promptly to any SEC comments or requests.
What New Compliance Policies and Procedures Will I Need?
As an RIA, you'll need written policies and procedures covering the following but not limited to:
- Code of Ethics
- Personal trading
- Portfolio management
- Trading practices and allocation
- Marketing and advertising
- Privacy and cybersecurity
- Business continuity and disaster recovery
- Proxy voting
- Anti-money laundering (by Jan 1 2026)
What Additional Record-Keeping Requirements Apply to RIAs?
RIAs must maintain detailed records including but not limited to:
- Investor agreements and offering documentation
- Marketing materials and communications
- Personal trading reports
- Compliance policies and procedures
- Employee records and certifications
- Trading and allocation records
- Performance calculation documentation
- Records regarding the valuation of securities
Do We Need to Hire Additional Staff?
Many firms find they need to add:
- A Chief Compliance Officer (if not already in place)
- Compliance support staff
- Additional operations personnel
- External compliance consultants (optional but not required)