Tuesday, July 11, 2017

Wyoming adopts new investment adviser, crowdfunding, Reg. A + rules

By Jay Fishman, J.D.

Wyoming, the only state to have never regulated investment advisers, now adopts investment adviser rules by emergency, effective June 30 to October 28, 2017. The rules align with Wyoming’s new Securities Act that took effect on July 1, 2017. The new Act is modeled after the Uniform Securities Act of 2002.

The emergency rules additionally include two crowdfunding exemptions and a Regulation A + notice filing, along with broker-dealer, agent, issuer-agent, exemption and securities registration, and small company offering registration amendments to pre-new Act rules.

Investment advisers--Initial registration. To initially register, investment adviser applicants must electronically file with the IARD a complete Form ADV, Uniform Application for Investment Adviser Registration. The application must be accompanied by: (1) proof of meeting written exam requirements; (2) financial statements including a copy of last fiscal year’s balance sheet (but an unaudited balance sheet is required instead if the last fiscal year’s balance sheet is older than 45 days from the application filing date); (3) a copy of a surety bond (if applicable); (4) a $250 fee; and (5) any other Wyoming secretary of state-required information. The secretary will accept a copy of Form ADV, Part 2 filed electronically with the IARD or a paper copy filed directly with the secretary.

Annual renewal. To annually renew their registrations, investment advisers must electronically file with the IARD a $250 renewal fee and a copy of a surety bond (if applicable).

Amendments. Investment advisers must electronically file with the IARD any amendments to Form ADV. An amendment filed within 30 days of the event necessitating the amendment is considered “promptly filed.” Investment advisers must also electronically file with the IARD an annual update to Form ADV, within 90 days of their fiscal year-end.

Completion of filing. An initial or renewal investment adviser application is not considered “filed” until the secretary has received the required documents and fees.

Withdrawal. Investment advisers may withdraw from registration by electronically filing with the IARD a Form ADV-W, Notice of Withdrawal from Registration as Investment Adviser.

Other IA topics. The rules additionally cover the following topics:
  • Investment adviser representative registration;
  • Federal covered investment adviser notice filing;
  • Exemption for private fund advisers; 
  • Written exam requirement;
  • Minimum financial requirement (net worth);
  • Financial reporting;
  • Recordkeeping;
  • Business continuity and succession planning;
  • Bonding;
  • Custody;
  • Disclosures (Brochure Rule); 
  • Prohibited conduct; and
  • Investment advisory contract.
Intrastate crowdfunding exemption. Issuers claiming the intrastate crowdfunding exemption under the Wyoming Uniform Securities Act must file a notice with the secretary on the Wyoming Invests Now (WIN) Form. The notice must be filed at least 10 days before an offer is made under the exemption. The issuer must notify the secretary by email or in writing of the date the first offer is made. Any subsequent change to the offering information must be submitted to the secretary on the WIN Form within 15 days of the change. Purchaser residency validation, quarterly reports, and records are also required.

Federal crowdfunding. Issuers intending to make a crowdfunding offering under federal Securities Act, Sections 4(a)(6) and 18(b)(4)(C) must, for the initial offering in Wyoming, have their principal place of business in Wyoming or sell at least 50 percent of the aggregate amount of the offering to Wyoming residents. The issuers must file with the secretary of state: (1) a complete Uniform Notice of Federal Crowdfunding Form (or copies of all SEC-filed documents); (2) a Form U-2, Uniform Consent to Service of Process, if the consent is not filed on the federal crowdfunding form; and (3) a $200 fee. Renewal and amendment filing requirements are also provided in the rule.

Regulation A, Tier 2 offering. Issuers intending to make a Tier 2 offering under federal Regulation A must submit the following at least 21 calendar days before the initial sale in Wyoming:
  • A complete Regulation A – Tier 2 Notice Filing Form (or copies of SEC-filed documents);
  • A Form U-2, Uniform Consent to Service of Process if the Form U-2 is not filed on the Regulation A – Tier 2 form; and
  • A $200 renewal fee. 
Renewal and amendment filing requirements are also provided in the rule.