Investment Advisor Representatives' Duty to Update Form U4
The end of the year is an excellent time to remind investment advisor representatives (IARs) of the duty to update their Form U4. In addition, investment advisor firms should be, at least annually, reminding IARs of their ongoing duty to update the U4. According to the U4 instructions, "an individual is under a continuing obligation to amend and update information required by Form U4 as changes occur." A state regulator can take action against an individual for improperly reporting any information on the form. This is especially true for an individual's employment background and disciplinary actions.
IARs must also keep in mind that when switching advisor firms, not only must the IAR transfer his Form U4 to the new firm, a Form U5 must be filed for the old firm. The Form U5 must also be filed when an IAR leaves the industry altogether. Continuing amendments must be made to the residential and disciplinary information contained within the Form U5. According to the Form U5 instructions, even after an IAR terminates from an advisor firm, the IAR may have to provide information about the IAR's activities with the terminated advisor firm. Therefore, the IAR must forward residential changes for at least two years following their termination.
Finally, copies, with original signatures, of both the Form U4 and Form U5 must be maintained by the advisor firm and made available to regulators upon request.
If you have any questions regarding the Form U4 or need assistance with your firm's licensing and Form U4/U5 procedures, give us a call.
IARs must also keep in mind that when switching advisor firms, not only must the IAR transfer his Form U4 to the new firm, a Form U5 must be filed for the old firm. The Form U5 must also be filed when an IAR leaves the industry altogether. Continuing amendments must be made to the residential and disciplinary information contained within the Form U5. According to the Form U5 instructions, even after an IAR terminates from an advisor firm, the IAR may have to provide information about the IAR's activities with the terminated advisor firm. Therefore, the IAR must forward residential changes for at least two years following their termination.
Finally, copies, with original signatures, of both the Form U4 and Form U5 must be maintained by the advisor firm and made available to regulators upon request.
If you have any questions regarding the Form U4 or need assistance with your firm's licensing and Form U4/U5 procedures, give us a call.
Labels: Form U4, IAR Licensing
posted by bhill at 10:53 AM
SEC and NASSA Continue IARD System Fee Waiver
As the 2007 IARD Annual Renewal Season quickly approaches, there is good news for investment advisor firms. The SEC and NASAA announced last week that they will continue to waive the annual IARD system fees paid by investment advisor firms for the next two years. The two bodies also announced a waiver of initial set-up fees for new advisors filing through Web CRD/IARD. Prior to this announcement, initial fees ranged from $150 - $1,100 and $100 - $550 annually, depending on the amount of the firm's assets under management.
In addition to the waiver of firm fees, NASAA also announced the reduction of IAR initial and renewal fees. The fees are being reduced from $45 per IAR to $30 IAR.
*Please note this waiver does not apply to state filing fees which are collected through Web CRD/IARD.
This is certainly good news as regulators attempt to lighten the load of the cost of doing business as an investment advisor. To read the official press release click here.
To read more about the 2007 IARD Annual Renewal Season and our special Annual Renewal Service, please visit our website.
In addition to the waiver of firm fees, NASAA also announced the reduction of IAR initial and renewal fees. The fees are being reduced from $45 per IAR to $30 IAR.
*Please note this waiver does not apply to state filing fees which are collected through Web CRD/IARD.
This is certainly good news as regulators attempt to lighten the load of the cost of doing business as an investment advisor. To read the official press release click here.
To read more about the 2007 IARD Annual Renewal Season and our special Annual Renewal Service, please visit our website.
Labels: IARD
posted by bhill at 4:24 PM
Future SEC Initiatives: IA/BD Study, Books and Records, New Part II, Soft-Dollar and Hedge Funds
In a recent speech, Andrew J. Donohue, Director of the SEC's Division of Investment Management, outlined several future initiatives for the Division of Investment Management. These initiatives include the SEC's Investment Adviser/Broker-Dealer study which aims to analyze current industry and regulatory practices and also examine the levels of protection afforded to investors under both the Securities Exchange Act and the Investment Advisers Act. The next initiative Mr. Donohue discussed is a potential reformulation of the SEC's books and records requirements for investment advisors. This should be welcome news as hopefully the SEC will factor the many technological changes that have occurred over the last 40 years and establish practical books and records requirements.
Mr. Donohue also mentioned the new Form ADV Part II. A new Part II is something advisors have been hearing about for over six years now. In fact, the SEC must repropose the changes to the current Part II which is currently being worked upon by the Division of Investment Management.
In regard to soft dollars, portfolio trading practices, and best execution, Mr. Donohue stated the Division has set a goal "to provide guidance that would enable fund boards and others to have meaningful dialogue with fund managers on soft dollar practices, as well as the adviser's philosophy with respect to brokerage and soft dollar practices."
Finally, according to the Mr. Donohue, the SEC's attempt to regulate advisors to hedge funds is not going away any time soon. Mr. Donohue reiterated Chairman Cox's intention "to recommend that the SEC promulgate a new anti-fraud rule under the Investment Advisers Act that would have the effect of "looking through" a hedge fund to its investors." The SEC has essentially gone back to the drawing board and is trying to find methods that will enable a new rule to withstand judicial scrutiny.
To read the text of Mr. Donohue's entire speech, click here.
Mr. Donohue also mentioned the new Form ADV Part II. A new Part II is something advisors have been hearing about for over six years now. In fact, the SEC must repropose the changes to the current Part II which is currently being worked upon by the Division of Investment Management.
In regard to soft dollars, portfolio trading practices, and best execution, Mr. Donohue stated the Division has set a goal "to provide guidance that would enable fund boards and others to have meaningful dialogue with fund managers on soft dollar practices, as well as the adviser's philosophy with respect to brokerage and soft dollar practices."
Finally, according to the Mr. Donohue, the SEC's attempt to regulate advisors to hedge funds is not going away any time soon. Mr. Donohue reiterated Chairman Cox's intention "to recommend that the SEC promulgate a new anti-fraud rule under the Investment Advisers Act that would have the effect of "looking through" a hedge fund to its investors." The SEC has essentially gone back to the drawing board and is trying to find methods that will enable a new rule to withstand judicial scrutiny.
To read the text of Mr. Donohue's entire speech, click here.
Labels: Form ADV, Record Keeping
posted by bhill at 3:54 PM
Outside Business Activities - Responsibility to Update Form ADV and Form U4
The establishment of sound policies and procedures aimed at monitoring the outside activities of its supervised persons (i.e. the advisor's officers, directors, partners, investment advisor representatives, and employees) should be part of any firm's written compliance programs. It is suggested that some type of "outside business activities form" be created and all supervised persons be required to complete the form on an annual basis and whenever changes are needed. Besides the human resources reasons for monitoring outside business activities, there are two important regulatory reasons: (a) Form ADV disclosure purposes, and (b) Form U4 disclosure purposes.
An investment advisor is required to disclose to clients all potential and real conflicts of interests including outside activities of the firm and its related persons. Item 8 of ADV Part II outlines specific business activities or affiliations of the firm's related persons that must be disclosed. These include affiliations with institutions such as banks, real estate brokers, and broker/dealers. Individuals listed under Item 6 of ADV Part II need to provide detailed business background for the preceding five years. Finally, Item 7 of the Part II requires the firm to provide a description of the outside activity and the amount of time spent on that activity.
In addition to disclosing outside activities on the Form ADV, advisor representatives must disclose their employment history for the previous 10 years and their current outside business activity on the Form U4. It is an advisor representative's ultimate responsibility to keep the Form U4 current and complete; particularly his/her employment and other business background.
Investment advisors need to be cognizant of the 30 day deadline for making material updates to the Form ADV and Form U4. Whenever an individual or firm's outside business activities change, those activities need to be updated on the Form ADV and/or Form U4 within 30 days of the change. Moreover, as a best practice, investment advisors should consider requiring its officers, directors, investment advisor representatives and employees to complete an outside business disclosure form on an annual basis. If you have questions regarding these requirements or want to discuss practical applications for the monitoring of outside business activities, please give us a call today.
An investment advisor is required to disclose to clients all potential and real conflicts of interests including outside activities of the firm and its related persons. Item 8 of ADV Part II outlines specific business activities or affiliations of the firm's related persons that must be disclosed. These include affiliations with institutions such as banks, real estate brokers, and broker/dealers. Individuals listed under Item 6 of ADV Part II need to provide detailed business background for the preceding five years. Finally, Item 7 of the Part II requires the firm to provide a description of the outside activity and the amount of time spent on that activity.
In addition to disclosing outside activities on the Form ADV, advisor representatives must disclose their employment history for the previous 10 years and their current outside business activity on the Form U4. It is an advisor representative's ultimate responsibility to keep the Form U4 current and complete; particularly his/her employment and other business background.
Investment advisors need to be cognizant of the 30 day deadline for making material updates to the Form ADV and Form U4. Whenever an individual or firm's outside business activities change, those activities need to be updated on the Form ADV and/or Form U4 within 30 days of the change. Moreover, as a best practice, investment advisors should consider requiring its officers, directors, investment advisor representatives and employees to complete an outside business disclosure form on an annual basis. If you have questions regarding these requirements or want to discuss practical applications for the monitoring of outside business activities, please give us a call today.
Labels: Form ADV, Form U4, Outside Business Activities
posted by bhill at 1:42 PM
2007 IARD Annual Renewal and Form ADV Annual Amendment Requirements
Beginning Monday, November 6, 2006, investment advisor firms can access their 2007 Preliminary Renewal Statements via their IARD account. The Preliminary Renewal Statement must be paid, in full, by Friday, December 8, 2006. Because it takes approximately two days for payment to post to the IARD account, the funds should arrive no later than Wednesday, December 6, 2006, to ensure the money is posted to your IARD account by the 8th.
We also want to remind firms of their obligation to amend the Form ADV on at least an annual basis in the form of an Annual Amendment. This is required under Rule 204-1 of the Investment Advisers Act of 1940 and similar state rules. The Annual Amendment must be completed within 90 days after an advisor firm's fiscal year end. Since the majority of advisor firms coordinate their fiscal year end with the end of the calendar year, the Annual Amendment has become a requirement that must be completed at the beginning of each year for most firms. The main item that must be updated on the Annual Amendment is the firm's assets under management. Other items such as, but not limited to, the number of accounts, clients, employees, and advisor representatives should also be updated. The Annual Amendment can also be used to disclose any material changes. Keep in mind, however, that material changes need to be disclosed within 30 days no matter when they take place. Material changes include items such as, but are not limited to, reportable disciplinary and financial disclosures, changes in advisory programs, changes in fee arrangements and changes in billing practices.
RIA Compliance Consultants is offering a special package that includes assistance with completing both the annual renewal requirement and filing the Annual Amendment to Form ADV Part 1. For the low price of $445, RIA Compliance Consultants will help your firm confirm its registration status in all necessary jurisdictions and confirm the registration status of all investment advisor representatives for 2007. You will also receive an Annual Amendment Questionnaire which we will help you complete so that we may prepare and file your Form ADV Part 1 Annual Amendment within the necessary timeframe.
Please contact us today to receive an agreement for our services. Note: Engagements received after November 15 are subject to availability.
*If you are an RIA Compliance Consultants annual retainer client, this service is included in your retainer agreement. To learn more about our retainer services and fees please contact us at bhill@ria-compliance-consultants.com.
We also want to remind firms of their obligation to amend the Form ADV on at least an annual basis in the form of an Annual Amendment. This is required under Rule 204-1 of the Investment Advisers Act of 1940 and similar state rules. The Annual Amendment must be completed within 90 days after an advisor firm's fiscal year end. Since the majority of advisor firms coordinate their fiscal year end with the end of the calendar year, the Annual Amendment has become a requirement that must be completed at the beginning of each year for most firms. The main item that must be updated on the Annual Amendment is the firm's assets under management. Other items such as, but not limited to, the number of accounts, clients, employees, and advisor representatives should also be updated. The Annual Amendment can also be used to disclose any material changes. Keep in mind, however, that material changes need to be disclosed within 30 days no matter when they take place. Material changes include items such as, but are not limited to, reportable disciplinary and financial disclosures, changes in advisory programs, changes in fee arrangements and changes in billing practices.
RIA Compliance Consultants is offering a special package that includes assistance with completing both the annual renewal requirement and filing the Annual Amendment to Form ADV Part 1. For the low price of $445, RIA Compliance Consultants will help your firm confirm its registration status in all necessary jurisdictions and confirm the registration status of all investment advisor representatives for 2007. You will also receive an Annual Amendment Questionnaire which we will help you complete so that we may prepare and file your Form ADV Part 1 Annual Amendment within the necessary timeframe.
Please contact us today to receive an agreement for our services. Note: Engagements received after November 15 are subject to availability.
*If you are an RIA Compliance Consultants annual retainer client, this service is included in your retainer agreement. To learn more about our retainer services and fees please contact us at bhill@ria-compliance-consultants.com.
posted by bhill at 2:14 PM
