FinCen, SEC Issue Proposed Rulemaking for Customer Identification Programs for Registered Investment Advisers

On May 13, FinCEN and the SEC jointly released a notice of proposed rulemaking on Customer Identification Programs (the “CIP Proposal”) that would require SEC-registered investment advisers (“RIAs”) and exempt reporting advisers (“ERAs”) to establish, document, and maintain written CIPs. The CIP Proposal would largely track the customer identification requirements currently applicable to banks, broker-dealers and mutual funds. The CIP Proposal would require RIAs and ERAs to develop:

• A written CIP;
• Risk-based procedures for performing identification and verification of customers that open accounts, which include:

• Collection of certain minimum identifying information of customers (e.g., name, date of birth or formation, address, and identification number), prior to opening an account; and
• Verification of the identity of each customer, using the foregoing information, through documentary or non-documentary means, within a reasonable time before or after the customer’s account is opened;

• Procedures for making and maintaining a record of information collected under the CIP, as well as verification performed, for at least five years;
• Procedures for determining whether a customer appears on any list of known or suspected terrorists or terrorist organizations issued by any federal government agency and designated as such by the Treasury Department in consultation with federal functional regulators; and
• Procedures for providing customers with adequate notice of the RIA’s or ERA’s CIP requirements.

Click here to read a press release covering the joint press release from the SEC and Treasury.
Click here to view the SEC and FinCen joint proposal.
Click here to read a fact sheet covering the rule proposal.