RIA Rising

Rhoades Says Florida Will Register His RIA; No Fine for Compliance Error

Former NAPFA board member Ron Rhoades said this afternoon that the state of Florida has accepted the registration of his RIA and issued the lowest possible sanction over the compliance problem that caused him to leave the board this week.

On Monday Rhoades (right), an attorney and professor who teaches financial planning in college, announced he had failed to register his RIA in time in Florida because he misunderstood the deadline for the registration.

He said he would step down from the board of the National Association of Personal Financial Advisors; he had been on the board for three years and was tapped to serve as board chair effective Sept. 1.

In an e-mail to REP. magazine and WealthManagement.com today, Rhoades said he had notified Florida clients of the problem after he was made aware of it by regulators in May, and he refunded his clients' fees. He described the issue as an oversight with severe consequences.

“While I know the federal and state rules very well, in a careless decision I just got these rules confused in my head as to when registration was required. Since I don’t deal with registration issues daily, it’s only natural I could make a mistake in this area,” Rhoades wrote.

“The result? Tens of thousands of dollars in lost revenue, many sleepless nights, and—of course—other consequences. There’s a lesson to be learned here—let those who practice full-time in the compliance area assist you.”

A call to the Florida Division of Securities for comment was not immediately returned. Rhoades wrote that the state had issued a letter of noncompliance, the lowest possible sanction for the offence, and would not impose a fine or other penalty.

Rhoades teaches at the State University of New York at Alfred. He founded his RIA, ScholarFi Inc., in New York in September 2011. The firm had a mere $25 million in assets and 20 clients, about half of whom were in Florida. Rhoades said he thought he had until the first quarter of this year to register in Florida.

When regulators sought more information from him last spring, he said he replied “with complete candor and honesty, acknowledging my mistake, and apologetically.”

News of his compliance problem and his decision to leave the board surprised many in the industry this week. Some told WealthManagement.com that the resignation was unnecessary, given the minor nature of the compliance issue.

But Rhoades said the lapse was material.

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