Dodd-Frank has created a vast overhaul of the regulatory environment for small RIAs.
The 12th annual Evolution/Revolution study that culled data from advisor filings with the SEC showed that more small firms now are under state supervision while large private fund advisors find themselves under the oversight of the SEC.
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Dodd-Frank increased the asset thresholds for state supervision from $25 million to up to $100 million. That sweeps many more firms out from under the SEC and under the umbrella of state oversight.
The changes have resulted in far fewer SEC-registered firms, although industry composition as measured by regulatory assets under management (RAUM) has remained fairly consistent.
Small firms with less than $1 billion in RAUM comprise 74% of all practices registered in 2012.
Nearly 60% of all SEC-registered firms employ fewer than 10 non-clerical workers and 90% of firms employ fewer than 50 people.
The changes also have brought a significant increase of private fund advisors under the scrutiny of the SEC. Nearly 37% of advisors say they advise on at least one private fund.
The number of advisors listing hedge funds and other pooled investments as clients spiked to 87.8%.
The growth in the hedge fund number is a direct result of the Dodd-Frank elimination of the private fund exemption upon which hedge funds formerly relied.
The results of the study show that small firms continue to dominate
the industry despite the fact that some consolidation has started to occur among independent RIAs.