http://www.integrated.solutions/blog/rss/feedsMon, 27 Apr 2026 16:53:10 -0700http://www.integrated.solutions/blog/post/what-broker-dealers-need-to-know-regarding-rule-17h-updates-in-2026http://www.integrated.solutions/blog/post/what-broker-dealers-need-to-know-regarding-rule-17h-updates-in-2026Effective on February 24, 2026, the Securities and Exchange Commission (SEC) issued Release No. 34‑104881, an Amended and Restated Order under Section 17(h)(4) of the Securities Exchange Act of 1934. This order updates and expands the exemption criteria that allow certain broker‑dealers to avoid the more burdensome requirements of Rules 17h‑1T and 17h‑2T, which relate to the SEC’s broker‑dealer risk assessment program. These rules were originally designed to ensure that the financial risks stemming from broker‑dealer affiliates could not compromise the financial stability of the broker‑dealer itself. The updated order reflects the SEC’s ongoing efforts to modernize regulatory thresholds in line with current market conditions. What the Risk Assessment Rules Require To understand why the exemption matters, it helps to know what the rules demand. Rule 17h‑1T requires broker‑dealers to maintain and preserve: A full organizational chart including the broker‑dealer and all affiliates Written policies and procedures for monitoring and controlling risks posed by affiliates Descriptions of material pending legal or arbitration proceedings Consolidating and consolidated financial statements Rule 17h‑2T requires: Quarterly and Annual filing of Form 17‑H, which captures detailed information about affiliates and potential risk exposures. Complying with these rules represent obligations that can be substantial, especially for smaller or non‑carrying broker‑dealers whose business models involve low systemic risk. What Changed in Release 34‑104881 The 2026 order significantly expands the pool of broker‑dealers eligible for exemption from Rules 17h‑1T and 17h‑2T. Key Updates: 1. Capital threshold increased The exemption now applies to firms with capital, as defined as including allowable subordinated liabilities for this purpose, of at least $20 million but less than $100 million. This raises the previous upper threshold from $50 million to $100 million. 2. Asset threshold unchanged Eligible broker‑dealers must still maintain total assets of less than $1 billion—reported on line item 940 of the FOCUS Report. 3. Applies to non‑carrying broker‑dealers A broker-dealer is eligible for the exemption if: It does not carry customer accounts, Does not hold or owe customer funds or securities, or Otherwise qualifies for exemption under Rule 15c3‑3(k)(2). 4. Replaces the 2020 order The new order supersedes the SEC’s June 29, 2020 exemptive order, which covered broker‑dealers with capital (plus subordinated liabilities) between $20 million and $50 million. Why This Matters for Broker‑Dealers This expanded exemption reflects the SEC’s recognition that smaller and mid‑sized broker‑dealers—particularly non‑carrying firms—pose relatively limited systemic risk. By raising the capital threshold to $100 million, the SEC allows a larger number of firms to avoid the administrative burden of quarterly Form 17‑H filings and extensive affiliate‑risk documentation. Practical Implications: Reduced compliance workload for qualifying firms Less frequent regulatory reporting, allowing firms to focus on core business operations Greater regulatory clarity for non‑carrying firms with moderate capital levels Broader alignment with current market structures and capital profiles Firms just above the old $50 million cap will now benefit from additional breathing room before becoming subject to the risk‑assessment requirements. Final Thoughts SEC Release 34‑104881 marks a meaningful shift in how the Commission calibrates regulatory obligations for broker‑dealers. By extending exemptions to firms with up to $100 million in capital—without compromising investor protection—the SEC appears to be taking a pragmatic approach to modernizing outdated thresholds. For broker‑dealers evaluating their compliance posture, this release offers both relief and an opportunity to reassess whether they fall within the expanded exemption criteria. If you’d like help interpreting how this applies to your specific firm or filing situation, the consultants at Integrated Solutions can walk you through the details. Sun, 22 Mar 2026 14:43:00 -0700http://www.integrated.solutions/blog/post/thanks-for-joining-us-at-the-wssfl-panthers-gamehttp://www.integrated.solutions/blog/post/thanks-for-joining-us-at-the-wssfl-panthers-gameThank you to everyone who joined us at the WSS-FL Panthers Game event. It was great to meet you all and connect with South Florida's top financial professionals while the Panthers took on the Red Wings. We had an incredible evening. Events like this remind us how valuable our community and partnerships truly are. It was wonderful to catch up with familiar faces, meet new ones, and enjoy an exciting game together. Looking forward to the next event when we can all get together.Fri, 13 Mar 2026 15:45:00 -0700http://www.integrated.solutions/blog/post/integrated-solutions-sponsors-wssfl-night-at-the-florida-panthers-vs-detroit-red-wingshttp://www.integrated.solutions/blog/post/integrated-solutions-sponsors-wssfl-night-at-the-florida-panthers-vs-detroit-red-wings We’re proud to announce that Integrated Solutions is an official sponsor of Wall Street South Florida's Night at the Panthers Game! On March 10th, South Florida’s top financial professionals will take over a private section at Amerant Bank Arena as the Panthers face the Red Wings. Tickets include:- Terrace-Level Private Section (Outdoor & Club Access)- Full Dinner Buffet- Open Bar- High-level networkingIf you’re in the South Florida finance community, this will be one of the best networking events of the year.Looking forward to connecting with you at the arena. Secure your seat here.Wed, 04 Mar 2026 05:04:00 -0700http://www.integrated.solutions/blog/post/integrated-solutions-sponsors-uncorrelated-miami-2026http://www.integrated.solutions/blog/post/integrated-solutions-sponsors-uncorrelated-miami-2026Integrated Solutions is proud to sponsor Uncorrelated Miami 2026, a curated alternative-investment conference taking place January 26–28, 2026 at the Ritz-Carlton, Miami Beach, during Miami Alts Week. Uncorrelated Miami brings together institutional investors, family offices, and global allocators with fund managers and operators across private credit, real estate, venture, digital assets, and frontier infrastructure. The event is intentionally designed for substance over scale—prioritizing high-quality allocator participation, capacity-constrained strategies, and meaningful conversations that lead to real capital formation. David S. Proskin, Managing Director, will be speaking on a panel at Uncorrelated Miami 2026, contributing to the broader dialogue alongside industry peers and market participants. Our sponsorship reflects Integrated Solutions’ long-standing commitment to supporting the alternative investment ecosystem and supporting managers across asset classes with a focus on operational excellence, transparency, and scalable infrastructure. Uncorrelated Miami’s investor-first, globally oriented format aligns closely with Integrated Solutions’ mission to help alternative investment managers operate efficiently, compliantly, and with confidence. We look forward to engaging with allocators, managers, and industry peers at Uncorrelated Miami 2026 and contributing to thoughtful, high-impact conversations across the alternative investment landscape. We hope to see you there. Learn more about Uncorrelated Miami and register here.Tue, 13 Jan 2026 07:06:00 -0700http://www.integrated.solutions/blog/post/integrated-investment-solutions-receives-2025-annual-soc-1-type-2-reporthttp://www.integrated.solutions/blog/post/integrated-investment-solutions-receives-2025-annual-soc-1-type-2-reportIntegrated Investment Solutions is proud to announce the successful completion of its 2025 Annual System and Organization Controls (SOC) 1 Type 2 examination. This milestone reinforces the firm’s steadfast commitment to upholding rigorous standards for security, availability, and confidentiality on behalf of its clients. The SOC 1 Type 2 report, performed by an independent third-party auditor, assesses the design and operating effectiveness of internal controls related to financial reporting. This comprehensive review confirms that Integrated Investment Solutions’ systems and processes align with the strict criteria established by the American Institute of Certified Public Accountants (AICPA). “We’re pleased to once again receive our SOC 1 Type 2 report, marking eight consecutive years,” said Rafael Beck, Senior Managing Director of Integrated Investment Solutions. “This recognition highlights our continued focus on operational excellence and delivering dependable service to our clients." Successfully completing the SOC 1 Type 2 examination reflects Integrated Investment Solutions’ proactive approach to risk management and its ongoing dedication to delivering protected and reliable investment solutions. Clients can remain confident that their financial information is managed with the highest standards of integrity and security. For more information about Integrated Investment Solutions and our commitment to security and compliance, please visit www.integrated.solutions. About Integrated Investment Solutions Integrated Investment Solutions is a leading provider of comprehensive fund administration services. With a focus on innovation and client satisfaction, we offer a wide range of solutions designed to meet the unique needs of our clients. Our team of experienced professionals is dedicated to delivering exceptional service and achieving outstanding results. Contact: Rafael BeckSenior Managing DirectorIntegrated Solutions212-897-1690rbeck@integrated.solutionswww.integrated.solutionsMon, 05 Jan 2026 14:46:00 -0700http://www.integrated.solutions/blog/post/toward-regulatory-efficiency-the-inefficiency-of-state-securities-laws-and-the-case-for-federal-preemptionhttp://www.integrated.solutions/blog/post/toward-regulatory-efficiency-the-inefficiency-of-state-securities-laws-and-the-case-for-federal-preemptionDownload the Article Here Introduction For much of the twentieth and twenty-first centuries, American securities regulation has developed through conflict, compromise, and historical accident. Long before Congress enacted the federal securities laws of the New Deal era, states had already ventured into the field of securities regulation by adopting “blue sky” statutes intended to protect residents from fraudulent securities schemes. With the introduction of federal regulation in the 1930s, this dual system became entrenched, producing an interlocking but often discordant web of oversight. While federal authority expanded over time—particularly through the adoption of, and amendments to, the Securities Act of 1933 and the Securities Exchange Act of 1934, and later through the Investment Advisers Act and the Investment Company Act—states continued to regulate broker-dealers, agents, and offerings. Simultaneously, private-market self-regulatory organizations (SROs) evolved into quasi-public regulators, adding yet another layer of governance. The cumulative effect is a regulatory structure characterized less by intentional design than by historical layering. Today, this structure imposes substantial inefficiencies. The fragmented oversight landscape produces overlapping and sometimes conflicting rules, burdensome filing and registration requirements, and legal uncertainty that burdens and is arguably harmful to firms and investors alike. While past reform efforts—including the creation of the National Association of Securities Dealers (NASD) and various securities exchanges made meaningful progress, they did not fully resolve the structural inefficiencies embedded in the dual regulatory system. Eventually, certain regulatory activities conducted primarily by the New York Stock Exchange and NASD were combined into the Financial Industry Regulatory Authority (FINRA) and the National Securities Markets Improvement Act of 1996 (NSMIA) was adopted. The establishment of FINRA was to a great extent achieved by the then head of NASD, Mary Schapiro being able to galvanize a consensus amongst key decision makers that a single rulebook that consolidated the rules of the two major existing SROs, which were then regulating a vast majority of the securities industry participants in the United States was a wonderful improvement over having multiple sets and layers of confusing regulations regulating those business activities. Historical analysis reveals that inefficiencies still persist and why meaningful reform must confront the legacy of America’s early regulatory choices. This article will provide a brief overview of the conceptual framework and historical analysis of state and federal regulation, outline the inefficiencies in the current system and propose some modern legislative or other remedies. I. Historical Foundations of American Securities Regulation To understand the inefficiency of modern securities regulation, it is essential to examine the historical development of the dual federal–state system. The persistence of state authority is not the product of modern policy considerations but the legacy of an era when securities markets were far smaller, less integrated, and more geographically isolated. A. Before Blue Sky Laws: The Early Securities Market (1860s–1910) In the late nineteenth century, the U.S. securities market was dominated by railroad bonds and shares, traded primarily in New York, Boston, and Philadelphia. Fraud existed, but the investing public was comparatively limited. Most capital formation was localized, and common-law fraud remedies were considered sufficient. Yet by the early 1900s, the market expanded dramatically. The rise of national telegraph networks, national investment trusts, and aggressive securities promoters fueled both legitimate growth and widespread abuse. States saw increasing reports of fraudulent or worthless securities being sold to their residents by itinerant promoters—often referred to as “blue sky merchants,” allegedly selling schemes backed by nothing more substantial than the “blue sky above.” B. The Rise of State Blue Sky Laws (1911–1933) Kansas enacted the first blue sky law in 1911, and within a decade more than thirty states had adopted their own statutes. These laws varied widely but generally included: Registration of broker-dealers and agents Registration or qualification of securities offerings Anti-fraud provisions Merit-based review of securities quality (in many states) The merit-review standard—authorizing state regulators to deny offerings deemed “unfair,” “inequitable,” or “speculative”—made state regulation substantively interventionist. States thus operated as gatekeepers, screening securities for residents. These laws formed the earliest foundation of U.S. securities regulation and persisted largely unchanged when federal regulation later emerged. C. Federal Securities Legislation and the New Deal (1933–1940) The stock market crash of 1929 and the banking crisis of the early 1930s prompted Congress to enter the securities regulation field aggressively. Between 1933 and 1940, Congress enacted the: Securities Act of 1933 Securities Exchange Act of 1934 Public Utility Holding Company Act of 1935 Trust Indenture Act of 1939 Investment Company Act of 1940 Investment Advisers Act of 1940 These statutes shifted the foundation of securities regulation from merit-based review to a disclosure-based regime, emphasizing transparency and investor autonomy. Yet Congress consciously did not pre-empt state authority. Instead, federal law operated alongside state systems, reflecting political realities of the era: Local investor protection advocacy remained influential. Many legislators believed states were closer to the problems of local fraud. Congress was wary of removing state autonomy entirely during a time of ultra-sensitive debates about federal power. Thus, from the outset, dual regulation was a political compromise rather than a deliberate policy choice. D. The Evolution of SROs and Industry Self-Governance (1930s–2000s) Parallel to federal and state systems, SROs emerged from exchange traditions: The New York Stock Exchange (NYSE) had policed its members since the eighteenth century. The Maloney Act of 1938 formally authorized national securities associations, of which there is only one currently in existence, FINRA. In 1939, the NASD was formed to regulate the over-the-counter market. For decades, the NYSE and NASD maintained separate rulebooks and examination regimes, creating duplicative obligations for firms. By the early 2000s, market participants and lawmakers criticized the inefficiency of multiple SROs. This culminated in the NYSE–NASD consolidation, forming FINRA in 2007 and was a major step toward rationalizing SRO regulation. E. Deregulatory Pressures and NSMIA’s Political Origins (1980s–1996) The movement toward federal pre-emption gained momentum in the late twentieth century due to: Expansion of national markets Increased interstate trading Growth of mutual funds and national broker-dealer networks Complaints about inconsistent state regulation and merit review During the 1980s and 1990s, business groups, including the Securities Industry Association (a predecessor to Securities Industry and Financial Markets Association (SIFMA), which is a securities industry non-SRO affinity group, lobbied Congress to modernize securities regulation to reflect national market realities. The resulting legislation—NSMIA of 1996—was shaped by: Bipartisan concern that fragmented regulation hindered capital formation Recognition that states lacked the resources or expertise to oversee large investment advisers Compromise between federal pre-emption advocates and state regulators seeking to preserve authority NSMIA ultimately removed state authority to regulate or examine large investment advisers and pre-empted certain offering requirements but deliberately preserved state authority over broker-dealers. This carve-out was a political concession. State regulators and the North American Securities Administrators Association (NASAA), which is the oldest international investor protection organization but which is not an SRO, fiercely resisted federal pre-emption of broker-dealers, arguing that states were the “first line of defense” against retail fraud. This argument is at best highly subjective and is probably unsubstantiated since most defense against fraudulent activities as measured in dollar terms is probably conducted by the SEC or FINRA. As a result, NSMIA significantly modernized adviser regulation but left broker-dealer regulation in a fragmented condition that remains largely unchanged today. F. Post-NSMIA Developments and Contemporary Fragmentation Even after NSMIA: States continued to impose unique filing requirements. Examination requirements diverged among jurisdictions. Financial statement filing requirements remained inconsistent. New technologies (remote work, virtual offices, digital distribution) created novel regulatory conflicts that states addressed unevenly. The result is a system still reflecting the market realities of the nineteenth and early twentieth centuries rather than what currently exists now that in our country as we approach our semiquincentennial or a quarter millennium anniversary of its founding. II. The Case for a Modern Successor to NSMIA The historical persistence of state authority—rooted in pre-federal blue sky laws—explains why modern inefficiencies persist. State rules continue to duplicate federal requirements, sometimes diverge from them, and occasionally conflict outright. The barriers identified above stem from this historical legacy rather than coherent modern policy. The persistence of inefficiency in broker-dealer regulation—despite repeated attempts at harmonization—demonstrates that piecemeal solutions are insufficient. A structural reallocation of regulatory authority is required. This Part outlines a comprehensive proposal for a modern successor to NSMIA (“NSMIA II”), backed by doctrinal, economic, and policy arguments. It also anticipates potential objections and evaluates foreseeable consequences of enactment. A. The Rationale for Federal Pre-Emption of Broker-Dealer Regulation National Markets Require National Regulation When blue sky laws emerged in the early twentieth century, securities markets were regional, information flowed slowly, and state regulators were often the only accessible enforcement authority. In contrast, today’s trading environment is: instantaneous, electronic, cross-jurisdictional, and centrally intermediated by national broker-dealers and clearing agencies. The overwhelming majority of securities transactions are executed through platforms operating seamlessly across all fifty states, the District of Columbia (DC) and various territories. Broker-dealers rarely serve only a local or regional clientele; they serve national markets by design. The geography-based model of state regulation no longer bears a reasonable relationship to how securities are distributed or marketed. Federal Law Already Provides Robust Investor Protection Some critics argue that eliminating state authority risks reducing investor protection. However, federal and SRO oversight already includes: extensive disclosure requirements, financial responsibility rules, net capital standards, supervisory and supervisory control mandates, anti-fraud provisions, sales-practice rules, licensing examinations, continuing education obligations, and regular examinations and enforcement actions. Federal regulators and FINRA, not states, conduct the vast majority of enforcement actions concerning broker-dealer misconduct. The marginal benefit of additional state oversight is low compared with the compliance burdens imposed. The Existing System Creates Structurally Unnecessary Redundancy States often duplicate federal requirements while adding idiosyncratic procedural variations: separate form submissions, disparate deadlines, inconsistent definitions of branch offices and supervisory locations, distinct qualification retention mechanisms, and conflicting financial statement requirements. Each divergence creates operational friction. None materially improves investor protection nor do they promote market integrity. A wonderful example of the confusing patchwork of the current inefficient regulatory environment as of December 1, 2025 is contained by this two-page chart, https://www.finra.org/sites/default/files/srojurisdiction-fee-and-setting-schedule.pdf . Note, for example, that many states accept Residential Supervisory Locations and many do not do so. That particular category was established by a FINRA rule, which in turn was approved by SEC. B. Proposed Statutory Framework for NSMIA II A modernized statute should include several key components. Express Pre-Emption of State Regulation of Broker-Dealers Congress should enact an express pre-emption clause covering: the elimination of State, DC and territorial broker-dealer registration, the elimination of State, DC and territorial agent/representative registration, financial responsibility requirements, firm and individual qualification standards, business conduct location definitions, such as branch office definitions, office of supervisory jurisdiction (OSJ) definitions residential supervisory locations cybersecurity and operational requirements, and examination and enforcement authority (subject to limited carve-outs for fraud investigations). States would retain enforcement authority only for conduct taking place within their borders that violates federal law—not the authority to impose distinct rules. Such pre-emption is consistent with modern dormant U.S. Constitution Commerce Clause principles, which disfavor state laws that burden interstate markets in favor of protectionist or duplicative concerns. Integration of MSRB Rules into FINRA’s Rulebook The Municipal Securities Rulemaking Board (MSRB) adopts rules governing municipal securities dealers but has no enforcement authority; FINRA enforces those rules. The proposed statute should: merge MSRB rules into the FINRA rulebook, eliminate conflicting cross-references, and consolidate interpretive guidance. This approach mirrors the successful 2007 consolidation of the rules and practices of NYSE and NASD, which greatly reduced duplication and confusion. Mandatory Uniform Filings and Forms Just as NSMIA standardized adviser regulation, NSMIA II should require: exclusive use of Forms BD, U4, U5, and FOCUS for all jurisdictions, that there will no longer be any separate State, DC and territorial mandatory forms or filing requirements, uniform deadlines for financial statements, preferably not even mandating separate filings other than with the SEC and FINRA uniform definitions of branches, residential supervisory locations, and OSJs, and mandatory adoption of FINRA’s Maintaining Qualifications Program (MQP) for all states This statutory uniformity would eliminate the need for firms to track divergent state interpretations. Delegation of Examination and Enforcement Authority to FINRA and the SEC NSMIA II should clarify: the SEC will retain ultimate rulemaking authority, FINRA and SEC will administer day-to-day supervision and examinations, States, DC and territories may refer suspected violations to federal regulators but may not independently impose duplicative sanctions, and federal regulators must establish multi-state task forces for matters involving widespread misconduct, ensuring states retain a meaningful—yet non-duplicative—participation channel. This preserves accountability without reinstating inefficiency. C. Anticipated Objections and Responses Federalism Concerns State regulators and NASAA may argue that pre-emption infringes on state sovereignty. Yet Congress has long exercised its Commerce Clause authority to regulate national markets. Securities regulation is quintessentially interstate commerce. NSMIA II would mirror Congress’s previous decisions to pre-empt: investment adviser regulation (NSMIA 1996), certain capital raising exemptions (JOBS Act 2012), national bank regulation (through OCC precedents), and ERISA pre-emption in the employee benefits context. The historical trend supports broader—not narrower—federal pre-emption in national financial markets. Investor Protection Concerns Critics may fear that states serve as the “first responders” to fraud. But empirical evidence shows: FINRA and SEC conduct the vast majority of enforcement actions involving broker-dealers, most investor harm arises from conduct already prohibited by federal rules, and states, DC and territories rarely pursue unique forms of misconduct that federal regulators ignore. Moreover, NSMIA II could include provisions requiring the SEC and FINRA to maintain cooperative enforcement partnerships with state attorneys general. Concerns About Shrinking State Budgets State regulators may fear lost funding from registration fees. Congress could address this by: authorizing federal grants to states for investor education, or permitting states to levy modest federal-level fees administered through FINRA to offset costs. Funding concerns should not dictate the structure of national regulatory policy. D. Consequences of Enacting NSMIA II Reduced Compliance Costs Consolidation would eliminate: multiple state filings, variations in deadlines, additional financial statement submissions, duplicative examinations, and conflicting supervisory location definitions. Broker-dealers could streamline systems, reduce administrative overhead, and reallocate resources toward innovation, risk management, and investor service. Regulatory Workforce Impacts Some state regulatory personnel would likely be reassigned or retire earlier than anticipated. While this may cause localized disruption, it reflects a shift from redundant oversight to more specialized functions such as: consumer financial education, fraud investigation in non-securities fields, and state-level support for federal enforcement efforts. Federal agencies and SROs may absorb some displaced personnel. Increased Market Efficiency and National Consistency Finally, the capital markets would become: more predictable, more uniform, less burdened by fragmented rule sets, and better aligned with twenty-first century financial realities. A modern national market cannot function optimally under a regulatory regime designed for an era when quill pens were in vogue. E. The Long-Term Vision NSMIA II is not merely a technical adjustment but a foundational realignment. It recognizes that regulatory efficiency is a precondition for investor protection, not its adversary. By harmonizing the regulatory environment, Congress can ensure that: the current regulatory framework is costly, inefficient and counterproductive, enforcement will be more focused, oversight is modernized, and the U.S. would remain the world’s most competitive and transparent capital market. Conclusion Securities regulation has evolved through historical contingency rather than coherent design. The persistence of state and local oversight—long after the emergence of national capital markets—creates inefficiency and instability without delivering meaningful additional investor protection. Prior reforms, including NSMIA and the consolidation of NYSE and NASD into FINRA, demonstrate that rationalization is both possible and beneficial. A modern legislative sequel to NSMIA is essential to align regulatory structures with contemporary financial realities. By embracing regulatory efficiency as a foundational principle, Congress can create a streamlined, effective, and future-oriented system that preserves robust oversight while eliminating unnecessary burdens. The time has come to recognize that investor protection and regulatory efficiency are not competing priorities but mutually reinforcing pillars of a healthy financial system.Fri, 19 Dec 2025 06:45:00 -0700http://www.integrated.solutions/blog/post/running-the-business-or-%E2%80%A6help-how-do-i-run-this-thinghttp://www.integrated.solutions/blog/post/running-the-business-or-%E2%80%A6help-how-do-i-run-this-thingBy David Proskin, Managing Director, Integrated Solutions So, you’ve made the decision to embark on one of the most exciting, challenging and fear-inducing adventures of your career, launching a fund. Whether you are a seasoned veteran or a newly minted CFA with an “edge”, this is not a decision to be made without careful consideration. It is critical that before putting pencil to paper you understand what your motivations are for spinning out of the mothership. Is it the desire for autonomy? A spark of entrepreneurial spirit? ego? A drive to build a lasting legacy? Or perhaps a noble objective to make the world a better place (unlikely as it may sound)? The answer to those questions will shape how the launch process will unfold. Obviously, you may be smart, have gone to the best business schools and in many instances have led a sheltered and charmed life within the comfort of your legacy firms. You know how to analyze a company, build portfolios, and manage risk, but may have never faced the prospect of running a business beyond that. It is paramount for you to have and be able to articulate what you believe to be your “edge” in a clear, convincing and concise manner. In other words: Why are you better than everyone else? Generally, this is no time for modesty but a healthy dose of humility and the ability to communicate confidently but not arrogantly goes a long way here. Another key consideration will be who your investors will be. This determination should be thought of chronologically as well as in terms of financial milestones. For example, will your Day 1 capital come from personal funds and contributions from friends and family, or do you have somewhat of an institutional following with one or more key investors. It will be important to understand how what you are doing aligns with the objectives of those investors in terms of liquidity needs and investment time horizons. This will be the time to evaluate economic terms, your flexibility in negotiating terms with strategic investors and so forth. It will also be a good time to begin thinking about how much this adventure will cost and whether resources are available to put together a credible team to support the operation. A well-thought-out budget is a good place to start. Since strong performance is never guaranteed, it is sensible to build budgets based on recurring revenues, such as management fees. For example, let’s assume the fund will launch at $10 million, I know, it will, of course be way more, but humor me. Assuming that all investors are fee-paying and the management fee is 1.5%, your top-line budget would be $150,000. It is also a good time to think about what fees will be absorbed by the Fund versus those covered by the Management Company. Prospective investors will expect clarity on this. While certain portfolio-related costs-like research, travel or subscriptions-can be charged to the Fund, others such as compliance, shadow accounting, office rent, etc. are much less straightforward and often fall under the Management Company’s responsibilities. Assuming the venture still appears viable, consideration needs to be given to the composition of your team. Will you be a one-man band, flying solo, or what will the support system around you look like? This will include, assessing key-person risk, how the obligation to protect investor assets will be discharged or put differently, and what would happen should you be unavailable for an extended period of time? Establishing a clear contingency plan and defining roles within your team will be essential to instilling confidence in investors and ensuring operational continuity. Whether you’re launching solo or with partners, the time to plan for contingencies, compensation and structure is now, while the Management Company is in its embryonic stage and everything is “kumbaya”. Partners are getting along, all are generally at similar life stages (perhaps, or not) so this is the time to analyze the “what-if” scenarios. It is also wise to begin thinking about ownership structures with a long-term view, especially regarding future income tax (and estate) planning while the Management Company is small and has little or no significant value. As you move forward with launching your fund, now is the time to assess what partners will need in terms of compensation-both cash and equity, along with benefits and certain obligations relating to compliance with federal, state and local tax compliance (e.g., income and payroll taxes, etc.) Engaging a payroll processor or Professional Employer Organization (PEO) could be appropriate to streamline these responsibilities. These are just some of the foundational considerations even before the first entities get formed. Clearly, this is not a journey that is being undertaken without research and talking to colleagues about the roads they have travelled, and lessons learned about what is a best practice. A good legal advisor is generally considered to be the first hire. Law firms come in various shapes and sizes and the one selected should be experienced in the structure and strategy that will be employed. This is NOT a decision to make solely based on costs. You get what you pay for, and mistakes can be exceedingly more costly than the quoted fee. Next, engage a tax advisor or preparer. Along with the lawyers they will be positioned to guide and determine tax efficient structures and domiciles based on the underlying fund strategy. Typically, there are synergies to be obtained by using the same firm for tax preparation and the Fund’s financial statement audit, which is typically required by the Fund’s Offering Memorandum. Another key service provider that will need to be engaged will be the Fund Administrator. Post 2008 financial crisis & the Madoff scandal, the role of the 3rd party administrator took on much more significance and their presence went from being a “nice to have” to being essential. The Fund Administrator will maintain the “official” books and records of the Fund(s), process investor transactions (i.e. subscriptions/redemptions, Know Your Customer (KYC) and Anti-Money Laundering (AML) requirements) in addition to performing critical independent reconciliation and reporting functions. Essentially the Command Center for all non-research and trading matters. Depending on your investment strategy, you’ll need to identify the Prime Broker (or multiple Prime Brokers) to facilitate trading, manage collateral and cash flows for the Fund. Though it may seem counterintuitive, it is suggested that a technology provider be engaged to guide and advise concerning connectivity, data security and data protection protocols —critical components of your operational infrastructure. At this stage, it makes sense to consider a chronological timeline of the evolution of the organization which will include various milestones in terms of asset growth as well as infrastructure requirements at various levels. For example, given limited resources, are funds best allocated to portfolio research, construction and risk and how other internal controls will be addressed, typically via in-house or out-sourced resources? One might reasonably describe this as the “business plan”. Ultimately, the responsibility for the managing of the fund resides with the Fund Manager, you, and that responsibility CANNOT be delegated to any third party. Selecting reputable, experienced service providers is critical to support your strategy and protect your reputation. Again, you only get to do this once, and the reputational damage to you personally and the firm can be catastrophic if not managed properly. Mistakes will happen despite everyone’s best efforts to avoid them, and the key will be in how those mistakes are communicated and managed. Transparent, proactive communication builds credibility and trust with stakeholders. Mistakes with financial implications take on a different level of significance and how investors are treated speak a great deal about the character of the Fund Manager and the type of organization he or she manages. Mitigating the risks associated with financial and disclosure errors may be dealt with via insurance in the form of Errors and Omissions (E&O) coverage. For a start-up this can be a material consideration as coverage is typically quite expensive and a cost benefit analysis versus identified risks for a given investment strategy will be a key component in determining whether insurance is a cost-effective risk mitigation strategy or not. How We Can Help At Integrated Solutions, our team brings decades of combined experience to help you navigate these complex challenges with confidence and clarity. We maintain broad and deep relationships with the key service providers and partners needed to ensure a successful launch, and we would be happy to discuss any questions or concerns you may have as you navigate these exciting days. Please reach out to us to schedule a call at your convenience. Tue, 30 Sep 2025 13:50:00 -0700http://www.integrated.solutions/blog/post/to-shadow-or-not-to-shadow-is-no-longer-the-questionhttp://www.integrated.solutions/blog/post/to-shadow-or-not-to-shadow-is-no-longer-the-questionAuthored by: David Proskin, Managing Director, Integrated Solutions Contributions by: Rafael Beck, Senior Managing Director, Integrated Solutions In the world of asset management, particularly within hedge funds and private equity—shadow accounting has evolved from a discretionary practice to a critical control mechanism. This article defines what shadow accounting is, why it matters, and who relies on it most. To understand its growing importance, we must look at the evolution of fund structures, investor expectations, and regulatory scrutiny. As institutional investors demand greater transparency and operational due diligence becomes more rigorous, maintaining internal books and records alongside those of third-party administrators is no longer optional. For fund managers, shadow accounting is now a core component of a robust operational infrastructure, ensuring accuracy, mitigating risk, and reinforcing investor confidence. Historical Context Alternative Investments as an asset class have now existed for well over a half century. How and why the asset class has evolved over time and why is beyond the scope of this article. It is important to understand that Alternative Investments which generally have come to include Hedge, Private Equity, Private Credit, Real Estate among other fund strategies. Common factors will include centralized portfolio management, typically provided by a founding sponsor of the entity who will earn fees for their efforts. Fees typically fall into two categories: Management Fees- asset-based fees which will be earned regardless of whether the entity makes or loses money and are designed to cover operating costs of the venture. Performance Fees- arguably the more lucrative component, will be a fee (or allocation) based on the performance of the Fund. The computational aspect of the performance fee is limited only to the imagination of the Fund Manager and the objectives and requirements of its investors. Fund strategies employed by Fund Managers are limited only by the Fund Manager’s imagination, their professional background and skill set and what they understand their “edge” to be. At the heart of the Alternative Investment model is the Fund Manager, typically a General Partner (GP), in a traditional limited partnership structure, responsible for managing a portfolio of assets on behalf of their investors (Limited Partners or LPs). Fundamentally, it is the obligation of the GP to maintain accounting records that support performance which is typically expressed as the Net Asset Value (“NAV”) of the Fund. NAV is reported periodically to the Limited Partners to understand how effectively the Fund Manager is fulfilling its fiduciary duty. Before the 2008 financial crisis, Fund Accounting was generally considered to be a routine back-office function. However, the Madoff Scandal was a pivotal event and a wake-up call for Limited Partners. In a nutshell, Limited Partners had placed too much reliance on the reputation and marketing efforts of the General Partner. The concept of “trust but verify” now became the operating model. Whereas prior to 2008, accounting and preparation of the NAV was all over the map including internally, for the smallest and resource constrained Funds to the use of Third-Party Administrators to provide some level of verification and to maintain the books and records on behalf of the Fund Manager, today independent NAV verification became a non-negotiable control. Investors now expect third-party administrators to maintain books and records, ensuring transparency and safeguarding capital. It is important to note that the mere existence of an Independent Fund Administrator in no way relieves the Fund Manager of its obligation to its investors in terms of the performance of, and reporting by, the Fund. This point is critical to understanding how Shadow Accounting came to be a thing. Shadow Accounting: A Critical Control in Alternative Investments Building on the historical context, the definition of shadow accounting in the asset management space becomes clear: it refers to the internal controls put in place by the Fund Manager to ensure that information and fee calculations being reported and charged to its Limited Partners are accurate. In today’s environment, this is no longer a luxury, it’s a necessity. Given the diversity of strategies and structures in alternative investments, shadow accounting is not a one-size-fits-all solution. From the simplest investment strategies at the most rudimentary levels of implementation and given the amount of limited resources available to the Fund Manager, the level of shadow accounting can be limited to some level of detailed review of the period end NAV package generated by the Fund Administrator which would at a minimum include: Reviews of the reconciliations of cash balances and holdings versus prime broker records Verification valuation methodologies in line with offering documents Independent recalculation of management and performance fees Review of investor statements for accuracy and consistency It is worth noting that particular attention should be paid to transaction boundaries, particularly those involving cash movements. Prior to launch, it is imperative that cash controls between the Fund and the Third-Party administrator be discussed, risks identified, and controls implemented to ensure that all cash movements are valid, understood and documented. This would include processes for receipt and payment of investor subscriptions and redemptions, payment of Fund expenses and collateral movements. These controls must be well-documented, understood by all parties, and tested regularly to mitigate operational risk. As a Fund Manager moves across the spectrum of growth and complexity of their operation, it will need to be mindful of the need to be flexible and scalable in terms of how the Shadow Accounting will be accomplished. It goes without saying that for an emerging manager, resources are scarce and prospective investors, initially at least, have an expectation that those resources are best allocated to portfolio construction, research and risk management. Today, with the availability of technology, service provider solutions and an increasingly higher level of investor expectations, a robust control environment with a best in class, well-articulated, shadow accounting process has become a requirement rather than an option. Summary: Shadow Accounting as a Strategic Imperative Based on the current environment, it is safe to say that some level of Shadow Accounting is required to attract capital of any sort and the higher the level of sophistication of the targeted investor base is, the more comprehensive the Shadow Accounting framework will need to be. At Integrated Solutions, we bring a unique perspective in the ecosystem because of our role as both a Fund Administrator and a provider of Outsourced C-Suite services, we understand the operational, fiduciary, and governance challenges fund managers face. Importantly, we recognize the potential for conflicts of interest and maintain strict boundaries—we do not serve as Fund Administrator for any fund where we also provide C-Suite services. Our dual perspective allows us to offer tailored guidance to fund managers, helping them determine the appropriate level of shadow accounting based on their strategy, investor profile, and growth trajectory. Whether you're an emerging manager or an established firm scaling operations, we can help design a scalable, intelligent shadow accounting framework that supports your long-term objectives and meets the expectations of today’s investors.Wed, 30 Jul 2025 12:43:00 -0700http://www.integrated.solutions/blog/post/comment-letter-regarding-supporting-modern-member-workplaces-as-discussed-in-regulatory-notice-2507http://www.integrated.solutions/blog/post/comment-letter-regarding-supporting-modern-member-workplaces-as-discussed-in-regulatory-notice-2507Please follow the link below to download our comment letter. Comment regarding “Supporting Modern Member Workplaces” as discussed in Regulatory Notice 25-07Mon, 14 Jul 2025 08:29:00 -0700http://www.integrated.solutions/blog/post/comment-letter-on-finras-rule-modernization-initiative-regulatory-notice-2504http://www.integrated.solutions/blog/post/comment-letter-on-finras-rule-modernization-initiative-regulatory-notice-2504Please follow the link below to download our comment letter. Comment Letter on FINRA’s Rule Modernization Initiative (Regulatory Notice 25-04) Wed, 11 Jun 2025 07:49:00 -0700