Investment Advisers Must Make Investment Adviser Representatives Aware of the Need to Update U4

August 15, 2012

Investment adviser representatives must make amendments in a timely manner to their Form U4s when a material change occurs. Typically, this means filing an amended Form U4 within 30 days of the material change. Failure to do so can lead to fines, suspensions, or even being barred from acting as an investment adviser representative. Investment advisers must make sure their investment adviser representatives are aware of this requirement and understand the consequences of failing to update their Form U4s.

Information requested on the Form U4 includes the investment adviser representative’s name and any other names the person has gone by, current address and residential history, self-regulatory organization (“SRO”) registrations, employment history, outside business activities, and disclosure of any criminal, civil, financial, or regulatory actions and complaints. Investment adviser representatives must provide accurate information when they initially file the Form U4. Subsequently, investment adviser representatives must file an amended Form U4 if there are any material changes to the information provided in the initial Form U4.

A recent disciplinary order from the state of Washington signifies the importance of an investment adviser representative making his or her investment adviser aware of material changes so that a timely filing can be made to update the Form U4. In this order, the investment adviser representative was named a co-trustee to a trust but did not notify his investment adviser so it could update his Form U4 within the required 30 day timeframe. Pursuant to Washington law and according to the disciplinary order, “it is unlawful for any person to make or cause to be made, in any document filed with the director, any statement which is, at the time and in the light of the circumstances under which it is made, false or misleading in any material respect.” During the time the investment adviser representative was acting as a co-trustee to the trust he notified his investment adviser of two separate events that required his Form U4 to be updated but failed to notify his investment adviser that he was serving as a co-trustee to a trust.  The order specifies that Section 13F of Form U4 asks whether the individual investment adviser representative is currently engaged in any other business, including that of trustee.  The state of Washington also found that the investment adviser representative allowed two false or misleading Form U4s to be filed because he did not disclose the necessary information. According to the order, the investment adviser representative’s failure to amend the Form U4 within the 30 day required timeframe was one of the grounds that resulted in the denial of his future securities registration applications.

It is important that investment advisers make sure that their investment adviser representatives are aware that they need to update their Form U4s in a timely manner whenever there are material changes. In order to do so, investment advisers should create policies and procedures to ensure that investment adviser representatives are aware of this requirement.

For more information on filing and maintaining the Form U4, register to attend the webinar, “Solutions and Answers to Form U4 and Form U5 Challenges,” which will be presented by RIA Compliance Consultants on August 23, 2012, at 12:00pm CDT.

Posted by Bryan Hill
Labels: Form U4, Investment Adviser Representative, Webinar