There have been some important changes to Florida branch office applications in the past year, and it is important to be aware of these developments. Initially, the Florida Office of Financial Regulation (OFR) was taking an average of 5-13 days to approve applications. During the lag times in application approvals, financial advisors could not provide their clients with basic financial services or advice nor could advisors or firms earn any revenue. We have worked closely with the Florida state legislature and held meetings with the Florida OFR to ensure the legislative provisions met the needs of Florida advisors.
Florida recently passed Fla. Stat. 517.1202, which placed its branch office filing system online and made approval of applications automatic. Florida’s new law made approval of branch office applications automatic, eliminating these lag times in application approvals and allowing advisors to continue servicing their clients.
However, even though the approval is automatic, the OFR still reviews the applications for deficiencies. Whenever the OFR identifies a deficiency, the filer has 30 days from the date of receipt of the written notice to remedy the deficiency. If the deficiency is not cured within the 30 day period, the filer may be fined up to $10,000 and the filing may be suspended. If the application remains deficient for more than 90 days, the OFR must revoke the filing altogether.
To assist advisors in preventing avoidable fines and suspensions, we have compiled a list of the most common deficiencies found by OFR in branch office applications. A brief list, courtesy of the Florida Office of Financial Regulation, follows:
- Lack of Investment Adviser Registration by OSJ: The branch office registration application (Form BR) indicates that investment advisory business will be conducted in the branch office but the Office of Supervisory Jurisdiction (OSJ) for the branch does not have the proper investment advisory registration. In Florida, the OSJ of a branch conducting investment advisory business must have the proper licenses.
- OSJ Not Licensed in FL: Florida requires that the branch manager who is designated and supervises the branch office’s OSJ be licensed with the state and that the person be licensed as a principal with the state.
- Person in Charge is Remote from Branch Office: The Form BR asks that a person be designated the “person-in-charge” of the branch. Florida requires that a designated person, either a supervisor or person designated to supervise the branch office’s OSJ, live within the vicinity of the branch. However, OFR is seeing applications where the person in charge is not registered in Florida or does not live within the “vicinity” of the branch.
- B/D Must Be Licensed in FL: A firm seeking to open a branch office in Florida must be registered in the state. A common problem arises when a firm tries to open a branch office in Florida and the firm itself is not registered in Florida.
- Failure to Identify the Person Handling Expenses: Section IV of the Form BR asks whether anyone other than the applicant is handling expenses for the branch office. If the answer is “yes,” then the subsequent question asks for the identity of that person. Frequently the identity is left blank. If a “yes” answer is given, then a person must be identified.
Addressing these common mistakes can eliminate fines and suspensions for firms related to branch office registrations and make the processing of these notice filings easier for the Florida OFR staff. Please feel free to contact Jigar Gandhi, State Regulatory Affairs Counsel if you have any questions.