TwoCitiesCapital Posted June 2, 2016 Share Posted June 2, 2016 Does anyone know if the regulatory/compliance aspect is minimized if you are just setting up an LP that only has one or two friends as investors? For example, is there a requirement to become an RIA because you are managing money for someone else? I work in a non-investing role at a PE fund. If I were to invite two friends to buy interests in an LP for which I was the custodian of its investing account, I would disclose the holdings of that account regularly to my firm, for compliance purposes. But I'm wondering if I would also be required to become an RIA or complete any other securities licensing? I do have a CFA. I think it depends on the state. In CA if you provide advisory services to anyone for compensation you have to register as an investment advisor. Other states may be different. I think there's generally an out for number of clients/LPs/investors though, no? At least, I thought that was the case. Something like having fewer than 20 clients/investors all living in the state you are operating keeps you small enough to be under the radar or something like that. Link to comment Share on other sites More sharing options...
GregS Posted June 2, 2016 Share Posted June 2, 2016 California is pretty clear that if you receive compensation for advisory services from any client you have to register. I don't know if the rules are different if you are from another state and have only a few California clients. Some states have de minimus exceptions but you have to look state by state. Link to comment Share on other sites More sharing options...
hunterny Posted June 2, 2016 Share Posted June 2, 2016 Thanks for the feedback so far. Can anyone point me to the rules governing these questions online? I live in Texas and my investor friends live in Texas. Link to comment Share on other sites More sharing options...
GregS Posted June 2, 2016 Share Posted June 2, 2016 I should add that I don't think you have to register in California if you are managing for a small number of people but not receiving any compensation. So if you want to set up a fund with family or friends and build a track record, but not receive any fees, you are probably ok. I would caution anyone doing this to research the law, however, as there are probably numerous ways to run into trouble with the regulators, like if you are holding yourself out as an investment advisor or soliciting. More info here: http://www.dbo.ca.gov/Licensees/Broker-Dealer_and_SEC_Investment_Advisers/State_IA.asp Looking at this, it appears there is a de minimus exception in CA if you have fewer than 6 clients and no place of business in the state. Again, you have to start with whatever state you are operating in because they are not all the same. Link to comment Share on other sites More sharing options...
abyli Posted June 2, 2016 Share Posted June 2, 2016 Thanks for the feedback so far. Can anyone point me to the rules governing these questions online? I live in Texas and my investor friends live in Texas. Texas is the worst. If you have one Texas investor, you have to register. Link to comment Share on other sites More sharing options...
GregS Posted June 2, 2016 Share Posted June 2, 2016 Thanks for the feedback so far. Can anyone point me to the rules governing these questions online? I live in Texas and my investor friends live in Texas. Figure out who the regulator is in Texas. They will be the Department of Corporations, Dept of Securities Regulation, Dept of Business Oversight, something like that. Hopefully they have a lot of information on their website about how to register and governing law. Call them up if you have questions. Often the offices regulating this kind of thing are quite small and if you get ahold of the right people they are knowledgeable. This stuff can get pretty complicated and there are few clear sources of information, which is why many suggest paying for a service. Are you comfortable drafting an investment advisory agreement, for example? I did the registration myself and it was very frustrating at times. I had a number of items I had to correct on my application, including some things the state wanted in the ADV that weren't in the regulations or any other materials they provided. I learned a lot in the process but it definitely took a lot of time and energy. Link to comment Share on other sites More sharing options...
racemize Posted June 2, 2016 Share Posted June 2, 2016 If you are in Texas, my understanding is that you have to register if you take any money whatsoever for anything managing money. I am set up in Texas. Link to comment Share on other sites More sharing options...
Sionnach Posted June 20, 2016 Author Share Posted June 20, 2016 Has anyone used RIAinabox.com or RIA Compliance Consultants? I've spoken with both and they seem pretty similar in terms of price and services provided. I wanted to see if anyone on the forum had any experience with either of the providers. Thanks! Link to comment Share on other sites More sharing options...
jawn619 Posted June 21, 2016 Share Posted June 21, 2016 Has anyone used RIAinabox.com or RIA Compliance Consultants? I've spoken with both and they seem pretty similar in terms of price and services provided. I wanted to see if anyone on the forum had any experience with either of the providers. Thanks! I went through the process of setting up a RIA and I didn't use either of them. I did all the paperwork myself and am familiar with the details of the process. PM me, I'd be walk you through the complete process. Link to comment Share on other sites More sharing options...
Sionnach Posted July 15, 2016 Author Share Posted July 15, 2016 Would an RIA be considered the lowest cost option to begin managing OPM? Is it possible to set up an LLC and gain discretion over other peoples accounts or is having the RIA registration necessary to do that? Link to comment Share on other sites More sharing options...
Travis Wiedower Posted July 15, 2016 Share Posted July 15, 2016 Would an RIA be considered the lowest cost option to begin managing OPM? Is it possible to set up an LLC and gain discretion over other peoples accounts or is having the RIA registration necessary to do that? I believe in some states you don't have to register if you have fewer than five clients, but each state is different so confirm that. Maybe that'll save you a few hundred bucks, but honestly an RIA can be done super cheap. My total was around $750 (and ~1/3 of that was the LLC registration). Link to comment Share on other sites More sharing options...
Sionnach Posted July 15, 2016 Author Share Posted July 15, 2016 Would an RIA be considered the lowest cost option to begin managing OPM? Is it possible to set up an LLC and gain discretion over other peoples accounts or is having the RIA registration necessary to do that? I believe in some states you don't have to register if you have fewer than five clients, but each state is different so confirm that. Maybe that'll save you a few hundred bucks, but honestly an RIA can be done super cheap. My total was around $750 (and ~1/3 of that was the LLC registration). $750?? I haven't seen estimates lower than 2k for RIA's. Did you do the RIA registration yourself? Thanks Link to comment Share on other sites More sharing options...
Travis Wiedower Posted July 15, 2016 Share Posted July 15, 2016 $750?? I haven't seen estimates lower than 2k for RIA's. Did you do the RIA registration yourself? Thanks Yes, I did everything myself. It takes more time, but it's very doable (several others on this forum have done the entire process themselves as well). Link to comment Share on other sites More sharing options...
Sionnach Posted August 3, 2016 Author Share Posted August 3, 2016 Thanks again everyone for all the help! One more question for the forum - http://www.ilga.gov/commission/jcar/admincode/014/014001300H08050R.html (see link) Am I understanding the last paragraph correctly that even if I am a resident or the LLC is located in the state of Illinois, I do not have to register as an IA if I have less than 5 clients? My understanding was that if you are in the state, you have to register regardless. Does this imply Illinois is different than most states? Thanks! Link to comment Share on other sites More sharing options...
Homestead31 Posted August 7, 2016 Share Posted August 7, 2016 can anyone comment on the on-going costs and procedures for an RIA? I am in NY, but other input welcome as well. on the new york website (http://www.ag.ny.gov/investment-advisers-faqs) i was just reading about needing to provide a balance sheet and income statement and update documents annually. are you guys doing that all yourself? is there a template you use etc? any thoughts appreciated Link to comment Share on other sites More sharing options...
EricSchleien Posted August 7, 2016 Share Posted August 7, 2016 RIA in a box is great! Link to comment Share on other sites More sharing options...
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