Regulation of Investment Advisers by the U.S. Securities and Exchange Commission March 2013 Staff of the Investment Adviser Regulation Office Division of Investment Management U.S. Securities and Exchange Commission Regulation of Investment Advisers by the U.S. Securities and Exchange Commission* I. Introduction Money managers, investment consultants, and financial planners are regulated in the United States as “investment advisers” under the U.S. Investment Advisers Act of 1940 (“Advisers Act” or “Act”) or similar state statutes. This outline describes the regulation of investment advisers by the U.S. Securities and Exchange Commission (“SEC”). The Advisers Act is the last in a series of federal statutes intended to eliminate abuses in the securities industry that Congress believed contributed to the stock market crash of 1929 and the depression of the 1930s. The Act is based on a congressionally-mandated study of investment companies, including consideration of investment counsel and investment advisory services, carried out by the SEC during the 1930s.1 The SEC’s report traced the history and growth of investment advisers and reflected the position that investment advisers could not properly perform their function unless all conflicts of interest between them and their clients were removed. The report stressed that a significant problem in the industry was the existence, either consciously or, more likely, unconsciously, of a prejudice by advisers in favor of their own financial interests. The SEC’s report culminated in the introduction of a bill that, with some changes, became the Advisers Act. The Act, as adopted, reflects congressional recognition of the delicate fiduciary nature of the advisory relationship, as well as Congress’ desire to eliminate, or at least expose, all conflicts of interest that might cause advisers, either consciously or unconsciously, to render advice that is not disinterested.2 The outline that follows is divided into five sections, each of which addresses a different question: Who is an “investment adviser?” Which investment advisers must register with the SEC? Who must register under the Act? How does an investment adviser register under the Act? What are the requirements applicable to an investment adviser registered under the Act? * The U.S. Securities and Exchange Commission, as a matter of policy, disclaims responsibility for any private publication or statement by any of its employees. The views expressed in this outline are those of the staff of the Investment Adviser Regulation Office, and do not necessarily reflect the views of the U.S. Securities and Exchange Commission or others on the staff of the U.S. Securities and Exchange Commission. The Investment Adviser Regulation Office would like to thank Robert E. Plaze, the original author of this outline, for his substantial contribution. 1 See Investment Trusts and Investment Companies, Report of the Securities and Exchange Commission, Pursuant to Section 30 of the Public Utility Holding Company Act of 1935, on Investment Counsel, Investment Management, Investment Supervisory and Investment Advisory Services, H.R. Doc. No. 477, 76th Cong., 2d Sess. (1939). 2 SEC v. Capital Gains Research Bureau, Inc., 375 U.S. 180, 189, 191-192 (1963). 1 II. Who is an Investment Adviser? A. Definition of Investment Adviser Section 202(a)(11) of the Act defines an investment adviser as any person or firm that:  for compensation;  is engaged in the business of;  providing advice to others or issuing reports or analyses regarding securities. A person must satisfy all three elements to fall within the definition of “investment adviser,” which the SEC staff has addressed in an extensive interpretive release explaining how the Act applies to financial planners, pension consultants and other persons who, as a part of some other financially related services, provide investment advice.3 Published in 1987, Investment Advisers Act Release No. 1092 represents the views of the Division of Investment Management, which is primarily responsible for administering the Act. 1. Compensation. The term “compensation” has been broadly construed. Generally, the receipt of any economic benefit, whether in the form of an advisory fee, some other fee relating to the total services rendered, a commission, or some combination, satisfies this element.4 The person receiving the advice or another person may pay the compensation. 2. Engaged in the Business. A person must be engaged in the business of providing advice. This does not have to be the sole or even the primary activity of the person. Factors used to evaluate whether a person is engaged are: (i) whether the person holds himself out as an investment adviser; (ii) whether the person receives compensation that represents a clearly definable charge for providing investment advice; and (iii) the frequency and specificity of the investment advice provided.5 Generally, a person providing advice about specific securities will be “engaged in the business” unless specific advice is rendered only on a rare or isolated occasion.6 3 Applicability of the Investment Advisers Act of 1940 to Financial Planners, Pension Consultants, and Other Persons Who Provide Others with Investment Advice as a Component of Other Financial Services, Investment Advisers Act Release No. 1092 (Oct. 8, 1987) (“Release 1092”). 4 Id.; see also Kenisa Oil Company, SEC Staff No-Action Letter (May 6, 1982); SEC v. Fife, 311 F. 3d 1 (1st Cir. 2002) (a person provides advice “for compensation” if it understands that successful investment will yield it a commission); In the Matter of Alexander V. Stein, Investment Advisers Act Release. No. 1497 (June 8, 1995) (a person receives “compensation” if it fraudulently converts client funds to its own use). 5 Zinn v. Parish, 644 F.2d 360 (7th Cir. 1981); Release 1092, supra note 3. 6 For instance, the SEC staff would not view an employer providing advice to an employee in connection with an employer-sponsored employee benefit program to be in the business of providing advice, see Letter to Olena Berg, Assistant Secretary, Department of Labor, from Jack W. Murphy, Chief Counsel, Division of Investment Management, SEC (Feb. 22, 1996). See also Zinn, supra note 5 at 364 (“isolated transactions with a client as an incident to the main purpose of his management contract to negotiate football contracts do not constitute engaging in the business of advising others on investment securities.”). 2 3. Advising Others about Securities a. Advice about Securities. A person clearly meets the third element of the statutory test if he provides advice to others about specific securities, such as stocks, bonds, mutual funds, limited partnerships, and commodity pools. The SEC staff has stated that advice about real estate, coins, precious metals, or commodities is not advice about securities.7 The more difficult questions arise with less specific advice, or advice that is only indirectly about securities. The SEC staff has stated in this regard: (i) advice about market trends is advice about securities;8 (ii) advice about the selection and retention of other advisers is advice about securities;9 (iii) advice about the advantages of investing in securities versus other types of investments (e.g., coins or real estate) is advice about securities;10 (iv) providing a selective list of securities is advice about securities even if no advice is provided as to any one security;11 and (v) asset allocation advice is advice about securities.12 b. Advising Others. Questions about whether a person advises “others” usually arise when a client is not a natural person. The SEC staff generally looks to the substance of the arrangement rather than its form: (i) A general partner of a limited partnership that provides advice with respect to the investments of partnership assets is advising others (the limited partners) even where the general partner may have legal title to these assets.13 7 Robert R. Champion, SEC Staff No-Action Letter (Sept. 22, 1986). 8 Dow Theory Forecasts, SEC Staff No-Action Letter (Feb. 2, 1978). Thus, market-timing advice is advice about securities. See Maratta Advisory, Inc., SEC Staff No-Action Letter (July 16, 1981). 9 Release 1092, supra note 3; FPC Securities Corp., SEC Staff No-Action Letter (Dec. 1, 1974). See also SEC v. Bolla, 401 F.Supp. 43 (D.D.C. 2005), aff’d. in relevant part, SEC v. Washington Investment Network, 475 F.3d 392 (D.C. Cir. 2007) (person selecting investment advisers for clients meets the Advisers Act’s definition of “investment adviser”). 10 Release 1092, supra note 3. 11 RDM Infodustries, Inc., SEC Staff No-Action Letter (Mar. 25, 1996). The SEC staff takes the position that providing information about securities in a report does not constitute providing advice about the securities if: (i) the information is readily available to the public in its raw state; (ii) the categories of information presented are not highly selective; and (iii) the information is not organized or presented in a manner that suggests the purchase, holding, or sale of any security. See id. 12 Maratta Advisory, Inc., supra, note 8. See also SEC v. Bolla, supra, note 9. 13 Abrahamson v. Fleschner, 566 F.2d 862, 870 (2d Cir. 1977), cert. denied, 436 U.S. 913 (1978); SEC v. Haligiannis, 470 F. Supp. 2d 373, 383 (S.D.N.Y. 2007). 3 (ii) A wholly-owned corporate subsidiary exclusively advising the parent or another wholly owned corporate subsidiary would not generally be considered advising “others.”14 c. Investment Banking. The SEC staff does not believe that the Act applies to persons whose activities are limited to advising issuers concerning the structuring of their securities offerings (although such advice may technically be about securities).15 d. Non-U.S. Clients. The Act is silent regarding whether the clients must be U.S. persons. The SEC takes the position that a U.S. person providing advice exclusively to non-U.S. persons would still be subject to the Act.16 B. Exclusions from Definition There are several exclusions from the investment adviser definition available to persons who presumably (or at least arguably) satisfy all three elements of the definition. A person eligible for one of the exclusions is not subject to any provisions of the Act. 1. Banks and Bank Holding Companies. This exclusion is generally limited to U.S. banks and bank holding companies.17 The SEC staff has stated that the exclusion is unavailable to non-U.S. banks,18 credit unions, and investment adviser subsidiaries of banks or bank holding companies.19 2. Lawyers, Accountants, Engineers, and Teachers. The professional exclusion is available only to those professionals listed, and only if the advice given is incidental to the practice of their profession. Factors considered by staff to evaluate whether advice is incidental to a profession are: (i) whether the professional holds himself out as an investment adviser; (ii) whether the advice is reasonably related to the professional services provided; and (iii) whether the charge for advisory services is based on the same factors that 14 See Zenkyoren Asset Management of America Inc., SEC Staff No-Action Letter (June 30, 2011). 15 See, e.g., The Applicability of the Investment Advisers Act of 1940 to Financial Advisors to Municipal Bond Issuers, Division of Investment Management, SEC Staff Legal Bulletin No. 11 (Sept. 19, 2000), available at http://www.sec.gov/interps/legal.shtml. 16 See Release 3221, infra note 46, at n.76. 17 The term “bank” is defined in section 202(a)(2) of the Act. In 2001, the Act’s definition of “investment adviser” was amended so that banks and bank holding companies are not eligible for this exclusion to the extent that they serve or act as an investment adviser to a registered investment company. However, if, in the case of a bank, such services or actions are performed through a separately identifiable department or division, the department or division, and not the bank itself, is deemed to be the investment adviser. The term “separately identifiable department or division” is defined in section 202(a)(26). 18 Letter to Rep. William J. Hughes from Stanley B. Judd, Deputy Chief Counsel, Division of Investment Management, SEC (June 4, 1980). 19 First Commerce Investors, Inc., SEC Staff No-Action Letter (Jan. 31, 1991); Southwest Corporate Federal Credit Union, SEC Staff No-Action Letter (May 31, 1983). 4 determine the professional’s usual charge.20 3. Brokers and Dealers. A broker or dealer that is registered with the SEC under the Securities and Exchange Act of 1934 (“Exchange Act”) is excluded from the Act if the advice given is: (i) solely incidental to the conduct of its business as broker or dealer, and (ii) it does not receive any “special compensation” for providing investment advice. a. Solely Incidental. The SEC has stated that investment advice is “solely incidental” to brokerage services when the advisory services rendered are “in connection with and reasonably related to the brokerage services provided.”21 If advice is not “solely incidental,” a broker- dealer is subject to the Advisers Act regardless of the form of compensation it receives. b. Special Compensation. Generally, to avoid receiving “special compensation,” a broker or dealer relying on this exclusion must receive only commissions, markups, and markdowns.22 Bundled Fees. The SEC has stated a broker or dealer that receives a fee based on a percentage of assets that compensates the broker or dealer for both advisory and brokerage services receives “special compensation.”23 Separate or Identifiable Charge. The SEC has stated that a broker- dealer charges “special compensation” when it charges its customer a separate fee for investment advice, or when it charges its customers different commission rates, one with advice and one without, because the difference represents a clearly definable charge for investment advice.24 Broker-Dealer Agents. The SEC staff has stated that a registered representative of a broker-dealer can rely on the exclusion if she is: (i) giving advice within the scope of her employment with the broker- 20 Release 1092, supra note 3; Henry S. Miller Companies of Dallas, Texas, SEC Staff No-Action Letter (Feb. 21, 1975). 21 Certain Broker-Dealers Deemed Not To Be Investment Advisers, Investment Advisers Act Release No. 2376 (Apr. 12, 2005) (“Release 2376”), available at http://www.sec.gov/rules/final/34-51523.pdf. 22 Section 202(a)(11)(C). See S. Rep. No. 76-1775 at 22; H.R. Rep. No. 76-2639 at 28 (the term “investment adviser” was “so defined as specifically to exclude . . . brokers (insofar as their advice is merely incidental to brokerage transactions for which they receive only brokerage commissions.”)). 23 In Release 2376, the SEC adopted a rule that, among other things, deemed brokers charging asset- based brokerage fees (rather than commissions, mark-ups, or mark-downs) not to be investment advisers based solely on their receipt of special compensation. The rule was vacated for other reasons by a federal court in March 2007. Financial Planning Association v. SEC, 482 F.3d (D.C. Cir. 2007). See also National Regulatory Services, SEC Staff No-Action Letter (Dec 2, 1992) at n.3. 24 Final Extension of Temporary Exemption from the Investment Advisers Act for Certain Brokers and Dealers, Investment Advisers Act Release No. 626 (Apr. 27, 1978) (“Release 626”). See also, Opinion of the General Counsel Relating to Section 203(b)(3)of the Investment Advisers Act of 1940, Investment Advisers Act No. 2 (Oct. 28, 1940). The Commission proposed to codify this interpretation in a rule. See Interpretive Rule under the Advisers Act Affecting Broker-Dealers, Investment Advisers Act Release No. 2652 (Sept. 24, 2007). 5 dealer; (ii) the advice is incidental to her employer’s brokerage activities; and (iii) she receives no special compensation for her advice.25 Brokerage Customers. The SEC has stated that a broker-dealer does not have to treat its brokerage customers to whom it provides investment advice as advisory clients simply because it is registered under the Advisers Act. It must treat as an advisory client only those accounts for which it provides advice (i.e., non-incidental advice) or receives compensation (i.e., special compensation) that subjects the broker-dealer to the Advisers Act.26 4. Publishers. Publishers are excluded from the Act, but only if a publication: (i) provides only impersonal advice (i.e., advice not tailored to the individual needs of a specific client);27 (ii) is “bona fide,” (containing disinterested commentary and analysis rather than promotional material disseminated by someone touting particular securities); and (iii) is of general and regular circulation (rather than issued from time to time in response to episodic market activity).28 5. Government Securities Advisers. This exclusion is available to persons and firms whose advice is limited to certain securities issued by or guaranteed by the U.S. government.29 6. Credit Rating Agencies. This exclusion is available to any rating agency regulated under section 15E of the Exchange Act as a “nationally recognized statistical rating organization.”30 25 Institute of Certified Financial Planners, SEC Staff No-Action Letter (Jan. 21, 1986). 26 Release 626, supra note 24. The Commission has proposed to codify this interpretation in a rule. See Interpretive Rule under the Advisers Act Affecting Broker-Dealers, supra note 24. 27 See Weiss Research, Inc., et al, Investment Advisers Act Release No. 2525 (June 22, 2006) (newsletter publisher deemed to be an investment adviser providing personalized investment advice whose “auto- trading” program sent signals to broker-dealer, which automatically traded subscriber/customer securities consistent with signals). 28 Section 202(a)(11)(D). See Lowe v. SEC, 472 U.S. 181 (1985); SEC v. Gun Soo Oh Park, A/K/A Tokyo Joe, and Tokyo Joe’s Societe Anonyme Corp., 99 F. Supp. 2d 889 (N.D. Ill. 2000). If a publisher is required to register as a result of some other advisory activity, the adviser is subject to all of the provisions of the Act and SEC rules with respect to the publication. See Investment Advisers Act Release No. 870 (July 15, 1983)(“Release 870”). 29 Section 202(a)(11)(E). The scope of the exception includes persons whose advice is limited to: (i) direct obligations of the Federal government (e.g., U.S. Treasury obligations); (ii) securities subject to guarantees from the Federal government; and (iii) securities issued by or guaranteed by corporations whose securities are designated by the Secretary of the Treasury as exempt from the Exchange Act. The SEC staff has stated that advice about repurchase agreements collateralized by U.S. government securities does not fall within the exception. J.Y. Barry Arbitrage Management, Inc., SEC Staff No- Action Letter (Oct. 18, 1989). See also In the Matter of Rauscher Pierce Refsnes, Inc., et al., Investment Advisers Act Release No. 1863 (Apr. 6, 2000) (“Because Rauscher’s advice was not limited to Treasury securities or other government securities as described in section 202(a)(11)(E), that provision did not operate to exclude Rauscher from the definition of investment adviser.”). 30 Section 202(a)(11)(F), containing this exclusion for rating agencies, was added to the Act by the Credit Rating Agency Reform Act of 2006. Pub. L. No. 109-291, 120 Stat. 1327 (Sept. 29, 2006). 6 7. Family Offices. A family office that manages the wealth and other affairs of a single family is excluded from the investment adviser definition if it: (i) provides investment advice only to family clients; (ii) is wholly owned by family clients and exclusively controlled by family members and/or certain family entities; and (iii) does not hold itself out31 to the public as an investment adviser.32 a. Family Members. A family office’s “family members” include all lineal descendants (including adopted children, stepchildren, foster children, and, in some cases, persons who were minors when a family member became their legal guardian) of a common ancestor (no more than 10 generations removed from the youngest generation of family members), and such lineal descendants’ spouses or spousal equivalents.33 b. Family Clients. The family office’s clients generally may include family members; key employees; any non-profit or charitable organization funded exclusively by family clients; any estate of a family member, former family member, key employee, or subject to certain conditions, a former key employee; certain family client trusts; and any company wholly owned by and operated for the sole benefit of family clients.34 8. Governments and Political Subdivisions. The Act does not apply to the U.S. government, state governments and their political subdivisions, and their agencies or instrumentalities, including their officers, agents, or employees acting in their official capacities.35 9. Non-U.S. Advisers. There is no exemption for non-U.S. advisers. Non-U.S. persons advising U.S. persons are subject to the Act and must register under the Act36 unless eligible for one of the exemptions discussed below (e.g., the “foreign private adviser” registration exemption).37 The SEC does not accept “home state registration” of non-U.S. advisers in lieu of SEC 31 See infra notes 69 to 72 and accompanying text for discussion of “holding out.” 32 Rule 202(a)(11)(G)-1(b)(defining “family office” for purpose of section 202(a)(11)(G), which was added to the Act by the Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-203, 124 Stat. 1376 (2010) (“Dodd-Frank Act”)). Family offices that do not meet these conditions must register with the SEC unless another exemption is available. Rule 202(a)(11)(G)-1(e)(2). 33 Rule 202(a)(11)(G)-1(d)(6). 34 Rule 202(a)(11)(G)-1(d)(4). Key employees include executive officers, directors, trustees, general partners, or any person serving in a similar capacity for the family office or its affiliated family office, and certain employees who have participated in the investment activities of the family office or its affiliated family office for at least 12 months. Rule 202(a)(11)(G)-1(d)(8). 35 Section 202(b). 36 In the Matter of Banco Espirito Santo S.A., Investment Advisers Act Release No. 3304 (Oct. 24, 2011) (The SEC brought an enforcement action against a commercial bank headquartered in Portugal for violating section 203(a) by marketing its portfolio of financial services, including offering securities and providing advice regarding those securities, to U.S. residents who were primarily Portuguese immigrants without registering with the Commission.). 37 See Section III. B. 3 of this outline for discussion of the foreign private adviser exemption. 7 registration.38 The SEC has authority to designate, by rule or order, other persons who are not within the intent of the definition of investment adviser.39 III. Which Investment Advisers Must Register Under the Advisers Act? A firm that falls within the definition of “investment adviser” (and is not eligible for one of the exclusions) must register under the Advisers Act, unless it (i) is prohibited from registering under the Act because it is a smaller firm regulated by one or more of the states or (ii) qualifies for an exception from the Act’s registration requirement.40 All advisers, registered or not, are subject to the Act’s anti-fraud provisions. A. Prohibitions from Registration Until 1996, most investment advisers were subject to regulation by both the SEC and one or more state regulatory agencies. The Act was amended in 1996 and again in 2010 to allocate regulatory responsibility between the SEC and the states.41 Today, most small advisers and “mid-sized advisers” are subject to state regulation of advisers and are prohibited from registering with the SEC.42 Most large advisers (unless an exemption is available) must register with the SEC, and state adviser laws are preempted for these advisers.43 38 On June 12, 2007, the SEC held a “roundtable discussion” at which the possibility of revising its approach to mutual recognition was discussed. The SEC press release concerning the roundtable stated that “selective mutual recognition would involve the SEC permitting certain types of foreign financial intermediaries to provide services to U.S. investors under an abbreviated registration system, provided those entities are supervised in a foreign jurisdiction under a securities regulatory regime substantially comparable (but not necessarily identical) to that in the United States.” See http://www.sec.gov/spotlight/mutualrecognition.htm. 39 Section 202(a)(11)(H). See, e.g., International Bank for Reconstruction and Development and International Development, Investment Advisers Act Release Nos. 1971 (Sept. 4, 2001) (notice) and 1955 (July 27, 2001) (order) (declaring World Bank instrumentalities not to be investment advisers under the Act). Section 202(a)(11)(H) had been designated as section 202(a)(11)(F) until 2006, and as 202(a)(11)(G) until 2011, when it was re-designated by the Dodd-Frank Act. 40 Section 203(a). 41 National Securities Markets Improvements Act of 1996 (“NSMIA”), Pub. L. No. 104-290, 110 Stat. 3416 (1996); Dodd-Frank Act, supra note 32. Most of the provisions amending the Advisers Act to allocate regulatory responsibilities between the SEC and state governments have been codified in section 203A. 42 Section 203A(a). Section 203A creates a prohibition, not an exemption. See In the Matter of Matthew P. Brady, Investment Advisers Act Release No. 2178 (Sept. 30, 2003); In the Matter of Warwick Capital Management Inc., Initial Decision Release No. 327 (Feb. 15, 2007); Credit Agricole Asset Management Alternative Investments, Inc., SEC Staff No-Action Letter (Aug. 7, 2006). See also In the Matter of Royal Oak Capital Management, LLC, Investment advisers Act Release No. 3354 (Jan. 17, 2012) (cancelling the registration of an adviser that did not have required amount of assets under management to remain registered with the SEC). 43 See Sections 203(a) (registration required) and 203A(b) (preemption of state law). 8 1. Operation of Section 203A of the Advisers Act a. Small Advisers. Advisers with less than $25 million of assets under management are regulated by one or more states unless the state in which the adviser has its principal office and place of business has not enacted a statute regulating advisers.44 Thus, unless an exemption is available (discussed below), only a small adviser with its principal office and place of business in Wyoming (which has not enacted a statute regulating advisers) may register with the SEC. b. Mid-Sized Advisers. Generally advisers with between $25 million and $100 million of assets under management45 are regulated by one or more states if (i) the adviser is registered with the state where it has its principal office and place of business (e.g., it cannot take advantage of an exemption from state registration), and (ii) the adviser is “subject to examination” by that state securities authority.46 Unless an exemption is available, a mid-sized adviser with its principal office and place of business in New York or Wyoming is not “subject to examination” and must register with the SEC.47 c. Non-U.S. Advisers. Advisers whose principal office and place of business is outside the United States are not prohibited from registering with the SEC and thus are not subject to the assets under management thresholds.48 A non-U.S. adviser giving advice to U.S. persons49 must register with the SEC (and thus may avoid registration with state regulators), unless an exemption from registration is 44 Section 203A(a)(1) prohibits any adviser from registering with the SEC that is regulated or is required to be regulated in the state in which it maintains its principal office and place of business. The SEC interprets this provision to mean the prohibition applies only to an adviser that maintains its principal office and place of business in a state that has enacted an investment adviser statute. Rules Implementing Amendments to the Investment Advisers Act of 1940, Investment Advisers Act Release No. 1633 (May 15, 1997) (“Release 1633”) at n.83 and accompanying text. 45 The Dodd-Frank Act raised the threshold for advisers to register with the SEC to $100 million of assets under management. See section 410 of Dodd-Frank Act. A mid-sized adviser may register when it acquires $100 million of assets under management and must register once it obtains $110 million of assets under management, unless some other exemption is available. Rule 203A-1(a)(1). Once registered with the SEC, a mid-sized adviser is not required to withdraw from SEC registration and register with the states until the adviser has less than $90 million of assets under management. Id. 46 Section 203A(a)(2) prohibits a mid-sized adviser from registering with the SEC if the adviser is required to be registered as an adviser in the state where it has its principal office and place of business and is subject to examination by that state. See Rule Implementing Amendments to the Investment Advisers Act of 1940, Investment Advisers Act Release No. 3221 (June 22, 2011) (“Release 3221”). 47 See Instructions for Item 2 of Part 1A of Form ADV; Division of Investment Management: Frequently Asked Questions Regarding Mid-Sized Advisers, available at www.sec.gov/divisions/investment/midsizedadviserinfo.htm. New York and Wyoming did not advise the SEC staff that advisers registered with them are subject to examination. See Release 3221 at n.152, supra note 46. 48 See Release 1633, supra note 44 at Section II. E. An adviser with a principal office and place of business in another country does not have a principal office and place of business in a U.S. state that regulates investment advisers. 49 See infra note 64 for discussions of the definition of a “U.S. person.” 9