Insights & News

Your ID, Please: An Investment Adviser’s Guide to the Proposed Customer Identification Program

May 23, 2024
Client Alert

The U.S. Securities and Exchange Commission (SEC) and the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) jointly proposed a rule on May 13 that would require SEC-registered investment advisers (RIAs) and exempt reporting advisers (ERAs) (each an investment adviser and collectively investment advisers) to establish and maintain written customer identification programs (CIPs).1 In particular, the proposed rule would include prescriptive requirements for investment advisers to confirm the identity of every client, record such verifications, inform clients about the verification activities. It also would impose corresponding recordkeeping requirements.

The proposed rule largely mirrors — and in some respects, duplicates — existing requirements for other financial institutions, such as broker-dealers and mutual funds. This alert highlights the particular impact on investment advisers.

CIP Proposal
Under the proposed rule, each time a person opens a new “account” with an investment adviser, the person becomes a “customer” of the adviser. The definitions of “account” and “customer” are quite broad, and investment advisers might need to include relationships that are not part of current voluntary programs.

Read the full article here.

1 Customer Identification Programs for Registered Investment Advisers and Exempt Reporting Advisers, SEC Release No. BSA-1 (May 13, 2024).

The proposed rule follows a February proposal by FinCEN that, if adopted, would require investment advisers to develop and implement an AML/CFT program, file suspicious activity reports (SARs) and currency transaction reports, and meet certain recordkeeping and other requirements. Anti-Money Laundering/Countering the Financing of Terrorism Program and Suspicious Activity Report Filing Requirements for Registered Investment Advisers and Exempt Reporting Advisers, 89 Fed. Reg. 12,108 (proposed February 15, 2024) (to be codified at 31 C.F.R. pts. 1010, 1032).

Information contained in this publication should not be construed as legal advice or opinion or as a substitute for the advice of counsel. The articles by these authors may have first appeared in other publications. The content provided is for educational and informational purposes for the use of clients and others who may be interested in the subject matter. We recommend that readers seek specific advice from counsel about particular matters of interest.

© 2024 Stradley Ronon Stevens & Young, LLP. All rights reserved.

Related Services

Related Resources

back to top