Financial Services

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Crosses the SEC threshold

Reported AUM on Form ADV crosses $100M, moving the adviser from state to SEC registration.

Details
Standard cover
Probable gap
Needs
SEC Form ADV / IAPD
Exposure
E&O is rated on AUM, and the limits a state-registered book carried are not what an institutional client will require in a due-diligence questionnaire.
Window
Annual amendment, within 90 days of fiscal year end
Misfires
AUM swings with markets. A single crossing may reverse next year.

Takes custody of client assets

The custody answer on Form ADV changes to yes.

Details
Standard cover
Usually excluded
Needs
SEC Form ADV / IAPD
Exposure
Custody brings a surprise examination and a fidelity bond expectation, and it is the fact that decides whether a claim is E&O or theft.
Window
At amendment, ahead of the first surprise exam
Misfires
Deducting fees from client accounts counts as custody and is not what most people mean by it.

Licensed in a new state

An NMLS licence is granted in a state the entity held none in.

Details
Standard cover
Probable gap
Needs
NMLS Consumer Access
Exposure
Each state sets its own surety bond amount, and the bond is a condition of the licence rather than something to arrange later.
Window
Licence issues before lending can begin
Misfires
Some states licence per branch, so one expansion produces several records.

First Form D

A Form D is filed for a company with no prior filing.

Details
Standard cover
Probable gap
Needs
SEC EDGAR Form D
Exposure
Outside money means outside directors, and the investor's own counsel usually makes D&O a closing condition rather than a later purchase.
Window
Due within 15 days of first sale, so the round is already closed
Misfires
Priced rounds that skip Reg D never file one, so absence proves nothing.

Named in a breach notification

A state attorney general publishes a notification naming the company.

Details
Standard cover
Usually excluded
Needs
State Breach Notifications
Exposure
The incident is public and the claim is live. What is open is whether the cyber tower covers notification costs and regulatory defence, which is where these run up.
Window
Filed within the state's notification deadline
Misfires
The filer may be a vendor reporting on a customer's behalf.