Dual regulation risk with American clients

British advisers and managers with American clients may face dual regulation under the country’s financial reform bill, a leading American lawyer says.

Elizabeth Shea Fries, a Boston-based partner in the business law department of the law firm Goodwin Proctor, says dual regulation will kick in unless advisers can satisfy four conditions.

Advisers and managers must be able to show they have no place of business in America; they must run no more than $25m (£16m) for American clients; they must have fewer than 15 American investors or clients; and they cannot hold themselves out to be an American adviser or advise on American mutual funds.

Firms that do not satisfy these conditions would be subject to examination by the Securities and Exchange Commission (SEC).

“One of the uncertainties that forthcoming regulation must resolve is how to decide whether someone counts as a US client,” says Fries. “The statute suggests on its face that British expats living in the US could be a problem.” (article continues below)

The Financial Services Authority allows British advisers to turn away Americans living in Britain.

Humphrey Turner, the group compliance officer at Hargreaves Lansdown, says: “If UK citizens leave to live in America we typically sever any connections, while we do not deal with American citizens living here. The costs associated with complying with US rules do not justify it. Instead we point US clients to banks like HSBC.”

Chelsea Financial Services says it has a handful of American clients living in Britain, who account for much less than the £16m maximum.


For more on American financial reform see this week’s Q&A feature.