Deadline Approaching for Investment Advisers to Complete the New Form U4 Regarding Regulatory Actions
Registered investment adviser firms must file amended Form U4s for all their investment adviser representatives to provide answers to the new regulatory action disclosure questions. The North American Securities Administrators Association ("NASAA") has published notice clarifying that the new questions on the FINRA Form U4 and the deadline of November 13, 2009 applies to investment adviser representatives.
Six regulatory action disclosure questions were added to the Form U4 on May 18, 2009. The new disclosure questions are Questions 14C(6)(7) and (8) and Questions 14E(5)(6) and (7). These questions are recorded with a blank answer on an investment adviser representative’s Form U4 filing, and investment adviser firms must provide answers to these new disclosure questions by not later than November 13, 2009. In order to respond to the new disclosure questions, a firm will need to submit Form U4s with responses to these new questions for all of the firm’s investment adviser representatives. If the firm determines that a “yes” response is required for any of the new disclosure questions, then the U4 filing would need to include a corresponding completed disclosure reporting page regarding the “yes” answer.
For additional details regarding the new Form U4 regulatory action questions, you may review information published on the FINRA website at the Approved Changes to Forms U4 & U5 web page and in the FINRA Regulatory Notice 09-23.
RIA Compliance Consultants, Inc. can help you file updated Form U4s for your investment adviser representatives. If you would like our assistance in updating the Form U4s for your investment adviser representatives, please contact our office at 877-345-4034.
Six regulatory action disclosure questions were added to the Form U4 on May 18, 2009. The new disclosure questions are Questions 14C(6)(7) and (8) and Questions 14E(5)(6) and (7). These questions are recorded with a blank answer on an investment adviser representative’s Form U4 filing, and investment adviser firms must provide answers to these new disclosure questions by not later than November 13, 2009. In order to respond to the new disclosure questions, a firm will need to submit Form U4s with responses to these new questions for all of the firm’s investment adviser representatives. If the firm determines that a “yes” response is required for any of the new disclosure questions, then the U4 filing would need to include a corresponding completed disclosure reporting page regarding the “yes” answer.
For additional details regarding the new Form U4 regulatory action questions, you may review information published on the FINRA website at the Approved Changes to Forms U4 & U5 web page and in the FINRA Regulatory Notice 09-23.
RIA Compliance Consultants, Inc. can help you file updated Form U4s for your investment adviser representatives. If you would like our assistance in updating the Form U4s for your investment adviser representatives, please contact our office at 877-345-4034.
Labels: Customer Complaint, Form U4, IAR Licensing
posted by bhill at 11:49 AM
Investment Adviser Reps May Need to Update Form U4
The U.S. Securities and Exchange Commission ("SEC") has approved FINRA’s proposed changes to Form U4 (Uniform Application for Securities Industry Registration or Transfer) and Form U5 (Uniform Termination Notice for Securities Industry Registration), and these changes may require an investment adviser representative to update his or her Form U4.
The changes to disclosure questions on the Forms U4 and U5 included the addition of questions about certain regulatory actions. The revised Forms have been implemented in the Central Registration Depository (CRD) system as of May 18, 2009. In summary, the changes included:
The changes to disclosure questions on the Forms U4 and U5 included the addition of questions about certain regulatory actions. The revised Forms have been implemented in the Central Registration Depository (CRD) system as of May 18, 2009. In summary, the changes included:
- Revision of questions on the Forms U4 and U5 to enable FINRA and other regulators to more readily identify individuals and firms subject to statutory disqualification based upon willful violations (pursuant to Section 15(b)(4)(D) or (E) of the Securities Exchange Act).
- Revision of question regarding the disclosure of arbitrations or civil litigations to require the reporting of allegations of sales practice violations made against a representative in an arbitration or civil lawsuit regardless of whether the representative is a named party in the arbitration or civil litigation.
- Revision to the monetary threshold for reporting of settlements of customer complaints, arbitrations, and civil litigations from $10,000 to $15,000 and making a conforming change for FINRA’s description of “Historic Complaints”.
- Revision to the definition of “Date of Termination” in Form U5, and enabling firms to amend the “Date of Termination” and “Reason for Termination” sections of the Form U5 subject to certain conditions and notifications.
The new questions regarding willful violations require a person to answer whether the SEC, the Commodity Futures Trading Commission or any self-regulatory organization has ever found them to have willfully violated any provision of the securities acts, to have willfully aided, abetted, counseled, commanded, induced, or procured the violation by any person of any provision of the securities acts, or to have failed reasonably to supervise another person subject to their supervision, with a view to preventing the violation of any provision of the securities acts. For these new questions related to willful violations, the reference to securities acts includes the Securities Act of 1933, the Securities Exchange Act of 1934, the Investment Advisers Act of 1940, the Investment Company Act of 1940, the Commodity Exchange Act, or any rule or regulation under any of such Acts, or any MSRB rules. See http://www.sec.gov/rules/sro/finra/2009/34-59916.pdf.
These changes to the Forms U4 and U5 became effective May 18, 2009, except with regard to the new disclosure questions regarding willful violations, which become effective 180 days from May 18, 2009, which is on November 14, 2009. A registered investment adviser firm should amend its investment adviser representative's Form U4 to respond to these new questions the first time a Form U4 amendment is filed after the effective date of May 18, 2009, but in any event, not later than 180 days following that date, which is November 14, 2009.
Because FINRA acts as the operator of the IARD and CRD systems and does not have regulatory authority over investment advisers, there may be a question as to the applicability to registered investment advisers of these changes and FINRA’s deadline for responding to the new willful violation questions. It should be noted that North American Securities Administrators Association ("NASAA") filed a comment letter dated April 15, 2009 in support of the proposed changes to the Forms U4 and U5. Generally, regarding the Forms U4 and U5, investment adviser representatives have an obligation to update previously filed Forms U4 and U5 if they become aware of new disclosure information. Since NASAA has supported the proposed changes to Forms U4 and U5, it is our opinion that the individual states are likely to expect investment adviser representatives to comply with FINRA’s requirements and effective dates regarding the changes to the Forms U4 and U5. If you have any questions regarding your state’s implementation and effective dates with respect to these changes to the Forms U4 and U5, we recommend you directly contact your state securities department.
If you wish to review FINRA’s Regulatory Notice 09-23, Revised Forms U4 and U5 in its entirety, you may access that Notice at the following link: http://www.finra.org/Industry/Regulation/Notices/2009/P118706
RIA Compliance Consultants, Inc. can help your registered investment adviser prepare and submit Forms U4 or U5. Please contact us at 877-345-4034 if you are interested in discussing such services.
Labels: Form U4
posted by bhill at 10:06 AM
Tips for Handling a Customer Complaint Against a Registered Investment Adviser
In the course of conducting investment advisory business, no matter how diligent you are, at some time a customer complaint may arise. It is typical that downturns in the securities markets lead to an increase in customer complaints. What is the proper course of action for you and your registered investment adviser to take if you do receive a complaint?
Initially, there may be a question about whether a particular communication from your customer is considered a complaint. If you have had any communication with a customer that you suspect may be interpreted as a complaint, you should promptly share that communication with your registered investment adviser's chief compliance officer. In the event that you are also affiliated with a broker-dealer as a registered representative, you will need to share this communication with your broker-dealer's compliance department. If you have errors and omissions professional liability insurance ("E&O") coverage, any complaint will need to be promptly submitted to your E&O carrier. If your registered investment adviser's chief compliance officer is not experienced in handling and reporting customer complaints, then you should not hesitate to request the assistance of outside legal counsel with expertise in securities law. Your registered investment adviser's chief compliance officer, as well as your broker-dealer's compliance department, if applicable, and outside legal counsel will help you determine whether the communication will need to be treated as a customer complaint and how best to respond to the customer's communication.
Generally, any verbal or written grievance by a customer should be treated as a complaint. Your registered investment adviser, as well as your broker-dealer, if applicable, likely have policies and procedures in place which require you to promptly forward any complaints to the chief compliance officer or other designated compliance personnel. It is important that all customer complaints are taken seriously, fully investigated and responded to in a prompt manner.
A suggested best practice is for the registered investment adviser's chief compliance officer or other designated complaint analyst to promptly acknowledge receipt of the complaint to the customer. The acknowledgment to the customer should indicate that the customer's concerns will be investigated, that the individual(s) reviewing the concerns may contact the customer for additional information, and that the registered investment adviser will provide a response to the customer upon the conclusion of its investigation. It is a good idea to provide the customer with a reasonable expectation about when the customer may receive a response.
It is critical that the customer complaint is thoroughly investigated, which involves gathering all of the material facts and interviewing the key individuals associated with the complaint. The chief compliance officer will need to review and assess the facts discovered during the investigation and determine what constitutes an appropriate resolution. Use of experienced outside legal counsel may be valuable in conducting an investigation of the complaint.
If there is a need or an anticipated need to keep certain communications or work product confidential due to the likelihood of arbitration or litigation, it will be necessary to retain outside legal counsel to conduct the investigation and prepare your defense in order to preserve the confidentiality of such communications or work product under attorney-client privilege. You should ask your attorney to explain the requirements and limitations of this privilege in greater detail. It is important that the investment adviser representative, compliance staff, and any other parties involved with the complaint understand that all information and documentation leading up to the complaint as well as information and documentation (if not subject to attorney-client privilege) created per the review of the complaint, including all written and verbal correspondence, may be discoverable in a formal proceeding such as arbitration or litigation or by regulators who conduct an investigation of the complaint.
If the review determines that a customer complaint has merit, then the chief compliance officer or outside legal counsel should make good faith efforts to fairly resolve the complaint. It is suggested that any settlement documents should be prepared by legal counsel to assure that the settlement is legally binding on the parties. If the review determines that a complaint does not have merit, the chief compliance officer or outside legal counsel usually provides a thorough explanation to the customer, citing relevant facts and clearly stating the reasons supporting that conclusion. Prompt responses to customer complaints can be an important risk management strategy that can result in a reduction of the number of arbitration and litigation claims filed against an investment adviser representative and the registered investment adviser.
Finally, in addition to assessing whether or not the customer complaint has merit, the chief compliance officer will need to make a determination about whether the complaint and its resolution will be reportable on the Form U4 for the investment adviser representative and/or on the registered investment adviser's Form ADV. Similarly, if you are affiliated with a broker-dealer as a registered representative, the broker-dealer will have reporting requirements, including Form U4 updates. An investment adviser representative who fails to promptly report a complaint may face disciplinary action from the investment adviser representative's affiliated registered investment adviser, broker-dealer firm, if applicable, as well as regulatory authorities. Likewise, a registered investment adviser's failure to comply with the applicable state or SEC regulatory reporting requirements can lead to disciplinary action of the firm.
Initially, there may be a question about whether a particular communication from your customer is considered a complaint. If you have had any communication with a customer that you suspect may be interpreted as a complaint, you should promptly share that communication with your registered investment adviser's chief compliance officer. In the event that you are also affiliated with a broker-dealer as a registered representative, you will need to share this communication with your broker-dealer's compliance department. If you have errors and omissions professional liability insurance ("E&O") coverage, any complaint will need to be promptly submitted to your E&O carrier. If your registered investment adviser's chief compliance officer is not experienced in handling and reporting customer complaints, then you should not hesitate to request the assistance of outside legal counsel with expertise in securities law. Your registered investment adviser's chief compliance officer, as well as your broker-dealer's compliance department, if applicable, and outside legal counsel will help you determine whether the communication will need to be treated as a customer complaint and how best to respond to the customer's communication.
Generally, any verbal or written grievance by a customer should be treated as a complaint. Your registered investment adviser, as well as your broker-dealer, if applicable, likely have policies and procedures in place which require you to promptly forward any complaints to the chief compliance officer or other designated compliance personnel. It is important that all customer complaints are taken seriously, fully investigated and responded to in a prompt manner.
A suggested best practice is for the registered investment adviser's chief compliance officer or other designated complaint analyst to promptly acknowledge receipt of the complaint to the customer. The acknowledgment to the customer should indicate that the customer's concerns will be investigated, that the individual(s) reviewing the concerns may contact the customer for additional information, and that the registered investment adviser will provide a response to the customer upon the conclusion of its investigation. It is a good idea to provide the customer with a reasonable expectation about when the customer may receive a response.
It is critical that the customer complaint is thoroughly investigated, which involves gathering all of the material facts and interviewing the key individuals associated with the complaint. The chief compliance officer will need to review and assess the facts discovered during the investigation and determine what constitutes an appropriate resolution. Use of experienced outside legal counsel may be valuable in conducting an investigation of the complaint.
If there is a need or an anticipated need to keep certain communications or work product confidential due to the likelihood of arbitration or litigation, it will be necessary to retain outside legal counsel to conduct the investigation and prepare your defense in order to preserve the confidentiality of such communications or work product under attorney-client privilege. You should ask your attorney to explain the requirements and limitations of this privilege in greater detail. It is important that the investment adviser representative, compliance staff, and any other parties involved with the complaint understand that all information and documentation leading up to the complaint as well as information and documentation (if not subject to attorney-client privilege) created per the review of the complaint, including all written and verbal correspondence, may be discoverable in a formal proceeding such as arbitration or litigation or by regulators who conduct an investigation of the complaint.
If the review determines that a customer complaint has merit, then the chief compliance officer or outside legal counsel should make good faith efforts to fairly resolve the complaint. It is suggested that any settlement documents should be prepared by legal counsel to assure that the settlement is legally binding on the parties. If the review determines that a complaint does not have merit, the chief compliance officer or outside legal counsel usually provides a thorough explanation to the customer, citing relevant facts and clearly stating the reasons supporting that conclusion. Prompt responses to customer complaints can be an important risk management strategy that can result in a reduction of the number of arbitration and litigation claims filed against an investment adviser representative and the registered investment adviser.
Finally, in addition to assessing whether or not the customer complaint has merit, the chief compliance officer will need to make a determination about whether the complaint and its resolution will be reportable on the Form U4 for the investment adviser representative and/or on the registered investment adviser's Form ADV. Similarly, if you are affiliated with a broker-dealer as a registered representative, the broker-dealer will have reporting requirements, including Form U4 updates. An investment adviser representative who fails to promptly report a complaint may face disciplinary action from the investment adviser representative's affiliated registered investment adviser, broker-dealer firm, if applicable, as well as regulatory authorities. Likewise, a registered investment adviser's failure to comply with the applicable state or SEC regulatory reporting requirements can lead to disciplinary action of the firm.
Labels: Customer Complaint, Form U4
posted by bhill at 9:47 PM
Proposed Changes To Forms U4 and U5 May Change Disclosure Requirements for Investment Adviser Representatives
The Financial Industry Regulatory Authority (FINRA) has proposed revisions that would require that allegations of sales practice violations made in arbitration claims and civil lawsuits against registered persons who are not named as parties in those proceedings be reported as customer complaints. Current reporting requirements do not require a report to the Form U4 (Uniform Application for Securities Industry Registration or Transfer) or Form U5 (Uniform Termination Notice for Securities Industry Registration) of allegations of a sales practice violation against a registered person contained in the body of the lawsuit or arbitration claim unless the registered person is specifically named as a defendant or respondent in the lawsuit or arbitration claim.
In considering these proposed revisions, it is helpful to understand the relationship between the parties involved in the registration and disclosure systems. The Investment Adviser Registration Depository (IARD) is an electronic filing system for Investment Advisers that is sponsored by the Securities and Exchange Commission (SEC) and the North American Securities Administrators Association (NASAA). FINRA does not have regulatory authority over Investment Advisers; however, FINRA serves as the developer and operator of the IARD system. The IARD system collects and maintains the registration and disclosure information for Investment Advisers and their associated persons. The SEC has mandated that its Investment Adviser registrants use the IARD system. The IARD system also accommodates registration requirements for state-regulated Investment Advisers. The IARD Program provides for the registration of Investment Advisor Representatives using the Individual Form Filing Functionality in Web CRD. Web CRD enables firms to register their Investment Adviser Representatives online via the Web CRD system. This Representative Registration component of the IARD system uses the Uniform Forms U4 and U5.
If a registered person is identified in a written complaint as the person responsible for alleged sales practice violation(s), the matter is required to be reported on that persons Form U4 or U5. However, the regulatory interpretation has been that even if a registered person is identified in the body of an arbitration claim or lawsuit as the person responsible for the alleged sales practice violation(s), the matter is not required to be reported on that persons Form U4 or U5 if he or she was not named as a respondent or defendant in the arbitration or litigation. This interpretation has resulted in arbitration and litigation claims-- a form of "customer complaint"-which allege sales practice violations against a registered person not being reported via the Forms U4 and U5. The proposed revision is intended to address this inconsistent treatment regarding the reporting of alleged sales practice violations. The proposed revision would require alleged sales practice violations made by a customer against registered persons identified in the body of a complaint, litigation or arbitration claim to be reported even when the registered persons are not named as parties in the litigation or arbitration.
As a matter of procedure, before becoming effective, FINRA's proposed rule change must be authorized for filing with the SEC by the FINRA Board and then must additionally be approved by the SEC after publication for public comment in the Federal Register.
RIA Compliance Consultants, Inc. can help your registered investment adviser prepare and submit Form U4 and U5 or other IARD registration and disclosure filings. Please contact us at 877-345-4034 if you are interested in discussing such services.
In considering these proposed revisions, it is helpful to understand the relationship between the parties involved in the registration and disclosure systems. The Investment Adviser Registration Depository (IARD) is an electronic filing system for Investment Advisers that is sponsored by the Securities and Exchange Commission (SEC) and the North American Securities Administrators Association (NASAA). FINRA does not have regulatory authority over Investment Advisers; however, FINRA serves as the developer and operator of the IARD system. The IARD system collects and maintains the registration and disclosure information for Investment Advisers and their associated persons. The SEC has mandated that its Investment Adviser registrants use the IARD system. The IARD system also accommodates registration requirements for state-regulated Investment Advisers. The IARD Program provides for the registration of Investment Advisor Representatives using the Individual Form Filing Functionality in Web CRD. Web CRD enables firms to register their Investment Adviser Representatives online via the Web CRD system. This Representative Registration component of the IARD system uses the Uniform Forms U4 and U5.
If a registered person is identified in a written complaint as the person responsible for alleged sales practice violation(s), the matter is required to be reported on that persons Form U4 or U5. However, the regulatory interpretation has been that even if a registered person is identified in the body of an arbitration claim or lawsuit as the person responsible for the alleged sales practice violation(s), the matter is not required to be reported on that persons Form U4 or U5 if he or she was not named as a respondent or defendant in the arbitration or litigation. This interpretation has resulted in arbitration and litigation claims-- a form of "customer complaint"-which allege sales practice violations against a registered person not being reported via the Forms U4 and U5. The proposed revision is intended to address this inconsistent treatment regarding the reporting of alleged sales practice violations. The proposed revision would require alleged sales practice violations made by a customer against registered persons identified in the body of a complaint, litigation or arbitration claim to be reported even when the registered persons are not named as parties in the litigation or arbitration.
As a matter of procedure, before becoming effective, FINRA's proposed rule change must be authorized for filing with the SEC by the FINRA Board and then must additionally be approved by the SEC after publication for public comment in the Federal Register.
RIA Compliance Consultants, Inc. can help your registered investment adviser prepare and submit Form U4 and U5 or other IARD registration and disclosure filings. Please contact us at 877-345-4034 if you are interested in discussing such services.
Labels: Form U4
posted by bhill at 10:47 PM
An Individual Serving as Both RR/IAR Should Verify Actual Registration as an IAR with State Regulators
Do you serve as both a registered representative of a broker-dealer and an investment advisor representative of an investment advisory firm that’s independent of the broker-dealer?
If so, you should take this opportunity at the end of the year to verify that you are properly registered as an investment advisor representative with the applicable state regulators. Many individuals that are dually licensed as registered representatives/investment advisor representatives assume that the broker-dealer will handle filing the Form U4 and licensing/registration renewals for you in both of your capacities. However, if you are affiliated with an independent investment advisor firm that’s not owned or operated by your broker-dealer, it’s highly unlikely that the broker-dealer’s licensing department will have filed your Form U4 and handled your annual registration renewals in your role as an investment advisor representative.
Failing to maintain the proper registration as an investment advisor representative can result in serious consequences, which can include a regulatory fine, required refund of client fees, withdraw of registration and/or re-examination and re-registration. Therefore, we’d encourage you to take personal responsibility for your licensing status and ensure that you’re properly registered as an investment advisor representative.
If you or your firm needs additional assistance with registration requirements of investment advisor representatives, please contact RIA Compliance Consultants at your convenience.
If so, you should take this opportunity at the end of the year to verify that you are properly registered as an investment advisor representative with the applicable state regulators. Many individuals that are dually licensed as registered representatives/investment advisor representatives assume that the broker-dealer will handle filing the Form U4 and licensing/registration renewals for you in both of your capacities. However, if you are affiliated with an independent investment advisor firm that’s not owned or operated by your broker-dealer, it’s highly unlikely that the broker-dealer’s licensing department will have filed your Form U4 and handled your annual registration renewals in your role as an investment advisor representative.
Failing to maintain the proper registration as an investment advisor representative can result in serious consequences, which can include a regulatory fine, required refund of client fees, withdraw of registration and/or re-examination and re-registration. Therefore, we’d encourage you to take personal responsibility for your licensing status and ensure that you’re properly registered as an investment advisor representative.
If you or your firm needs additional assistance with registration requirements of investment advisor representatives, please contact RIA Compliance Consultants at your convenience.
Labels: Form U4
posted by bhill at 1:06 PM
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
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
California Requires Paper U4 for Officers of State Registered Firms not also licensed as Advisor Representatives
The California Department of Corporations requires a Form U4 for each officer, director, partner and each person who owns 10% or more of an investment advisor firm registered directly with the State of California. Typically, state regulators require a Form U4 for only those individuals that serve as an investment advisor representative of the firm. California is taking an additional step and requiring a Paper Form U4 for Executive Officers and Owners of advisor firms, as reported on Form ADV Schedule A or B, that do not act as investment advisor representatives. If an individual’s Form U4 is on file with the Web CRD system, a paper Form U4 is not required.
If you have questions regarding your states’ licensing requirements or would like guidance regarding who should be licensed within your firm, please give us a call.
If you have questions regarding your states’ licensing requirements or would like guidance regarding who should be licensed within your firm, please give us a call.
Labels: Form U4
posted by bhill at 4:40 PM
