Recent Changes Regarding the Series 65 and Series 66 Examinations
Effective January 1, 2010, the North American Securities Administrators Association ("NASAA") has made some changes regarding the composition and the minimum passing score for the Series 65 and Series 66 Examinations.
The Series 65 is the Uniform Investment Adviser Law Examination, which is designed to qualify candidates as investment adviser representatives. The Series 65 Examination will continue to be comprised of 130 questions; however, effective January 1, 2010, the number of questions devoted to Legal and Regulatory Issues will decrease from 45 to 40 and the remaining 90 questions will cover Economic Concepts, including investment products, recommendations, and strategies and may include a few questions on Capital Markets Theory and specific types of accounts, such as College Savings Plans. Additionally, the Examination includes 10 questions which are considered pretest questions, which do not count towards the final grade. Effective January 1, 2010, the passing grade for the Series 65 Examination was increased from 68.5% to 72%.
The Series 66 is the Uniform Combined State Law Examination, which is designed to qualify candidates both as securities agents and investment adviser representatives. The Series 7 is considered a corequisite exam to the Series 66 and is required to be successfully completed in addition to the Series 66 before a candidate can register as a securities agent and investment adviser representative. The composition of the Series 66 Examination was significantly changed. The Series 66 Examination remains comprised of 100 questions; however, the number of questions testing knowledge of Legal and Regulatory Issues has decreased from 80 to 50 and the number of questions testing knowledge of Investment Recommendations, Strategies, and Products has increased from 20 to 50. Additionally, the Examination includes 10 questions which are considered pretest questions, which do not count towards the final grade. Effective January 1, 2010, the passing grade for the Series 66 Examination was increased from 71% to 75%.
The Series 65 is the Uniform Investment Adviser Law Examination, which is designed to qualify candidates as investment adviser representatives. The Series 65 Examination will continue to be comprised of 130 questions; however, effective January 1, 2010, the number of questions devoted to Legal and Regulatory Issues will decrease from 45 to 40 and the remaining 90 questions will cover Economic Concepts, including investment products, recommendations, and strategies and may include a few questions on Capital Markets Theory and specific types of accounts, such as College Savings Plans. Additionally, the Examination includes 10 questions which are considered pretest questions, which do not count towards the final grade. Effective January 1, 2010, the passing grade for the Series 65 Examination was increased from 68.5% to 72%.
The Series 66 is the Uniform Combined State Law Examination, which is designed to qualify candidates both as securities agents and investment adviser representatives. The Series 7 is considered a corequisite exam to the Series 66 and is required to be successfully completed in addition to the Series 66 before a candidate can register as a securities agent and investment adviser representative. The composition of the Series 66 Examination was significantly changed. The Series 66 Examination remains comprised of 100 questions; however, the number of questions testing knowledge of Legal and Regulatory Issues has decreased from 80 to 50 and the number of questions testing knowledge of Investment Recommendations, Strategies, and Products has increased from 20 to 50. Additionally, the Examination includes 10 questions which are considered pretest questions, which do not count towards the final grade. Effective January 1, 2010, the passing grade for the Series 66 Examination was increased from 71% to 75%.
Labels: IAR Licensing, Series 65
posted by bhill at 9:29 AM
2010 IARD Renewal & Form ADV Annual Amendment Requirements
Beginning Monday, November 16, 2009, registered investment advisor firms can access their 2010 Preliminary Renewal Statements via their IARD account. The Preliminary Renewal Statement must be paid, in full, by Friday, December 11, 2009. Because it takes approximately two days for payment to post to the IARD account, the funds should arrive no later than Wednesday, December 09, 2009, to ensure the money is posted to your IARD account by December 11.
RIA Compliance Consultants also wants to remind registered investment advisor firms of their obligation to update Form ADV on at least an annual basis in the form of an Annual Amendment. This is required under U.S. Securities and Exchange Commission ("SEC") Rule 204-1 of the Investment Advisers Act of 1940 and similar rules of state securities regulators. The Form ADV Annual Amendment must be completed within 90 days after a registered investment advisor firm's fiscal year end. Since the majority of investment advisor firms coordinate their fiscal year end with the end of the calendar year, the Form ADV Annual Amendment has become a requirement that must be completed at the beginning of each year for most advisor firms. The main item that must be updated on the Form ADV Annual Amendment is the investment advisor firm's assets under management. Other items such as, but not limited to, the number of accounts, clients, employees, and investment advisor representatives ("IARs") should also be updated. The Form ADV 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 contact information, changes to custody disclosures and changes due to successions and ownership arrangements.
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 $450, 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 2010. You will also receive an Annual Amendment Questionnaire for you to complete so that we may prepare and file your Form ADV Part 1 Annual Amendment within the necessary time frame.
Engagements received by RIA Compliance Consultants after November 16 are subject to availability so complete and return the Agreement for Services today! Click below to view the Consulting Agreement for IARD Renewal and Annual Amendment Services.
*If you are an existing hourly retainer client of RIA Compliance Consultants, you do not need to complete the Agreement for Services. Simply contact your lead consultant to sign-up for this service.
**If you are an annual retainer client of RIA Compliance Consultants, this service is included in your retainer agreement. To learn more about our retainer services and fees, please contact us at 877-345-4034.
IARD%20Renewal.Annual%20Amendment.2010.pdf
RIA Compliance Consultants also wants to remind registered investment advisor firms of their obligation to update Form ADV on at least an annual basis in the form of an Annual Amendment. This is required under U.S. Securities and Exchange Commission ("SEC") Rule 204-1 of the Investment Advisers Act of 1940 and similar rules of state securities regulators. The Form ADV Annual Amendment must be completed within 90 days after a registered investment advisor firm's fiscal year end. Since the majority of investment advisor firms coordinate their fiscal year end with the end of the calendar year, the Form ADV Annual Amendment has become a requirement that must be completed at the beginning of each year for most advisor firms. The main item that must be updated on the Form ADV Annual Amendment is the investment advisor firm's assets under management. Other items such as, but not limited to, the number of accounts, clients, employees, and investment advisor representatives ("IARs") should also be updated. The Form ADV 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 contact information, changes to custody disclosures and changes due to successions and ownership arrangements.
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 $450, 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 2010. You will also receive an Annual Amendment Questionnaire for you to complete so that we may prepare and file your Form ADV Part 1 Annual Amendment within the necessary time frame.
Engagements received by RIA Compliance Consultants after November 16 are subject to availability so complete and return the Agreement for Services today! Click below to view the Consulting Agreement for IARD Renewal and Annual Amendment Services.
*If you are an existing hourly retainer client of RIA Compliance Consultants, you do not need to complete the Agreement for Services. Simply contact your lead consultant to sign-up for this service.
**If you are an annual retainer client of RIA Compliance Consultants, this service is included in your retainer agreement. To learn more about our retainer services and fees, please contact us at 877-345-4034.
IARD%20Renewal.Annual%20Amendment.2010.pdf
Labels: Annual Amendment, Form ADV, IAR Licensing, IARD, Renewals
posted by bhill at 8:24 PM
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
Registered Investment Advisors Need to Monitor Outside Business Activities of Investment Advisor Representatives
The establishment of policies and procedures designed to monitor the outside business activities ("OBAs") of supervised persons (i.e. officers, directors, partners, investment advisor representatives, and employees) should be part of every registered investment advisor firm's written compliance programs. RIA Compliance Consultants, Inc. suggests 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. A supervised person should disclose and seek approval of an outside business activity prior to engaging in the activity.
There are two important regulatory reasons for monitoring outside business activities: (a) Form ADV disclosure purposes, and (b) Form U4 disclosure purposes. A registered 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 Form 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 Form ADV Part II need to provide detailed business background for the preceding five years. Finally, Item 7.C. of the Form ADV Part II may require the registered investment advisor firm to provide a description of the supervised person's outside activity and the amount of time spent on that activity.
In addition to disclosing outside activities on the Form ADV, investment advisor representatives ("IARs") must disclose their employment history for the previous 10 years and their current outside business activity on the Form U4. It is the investment advisor representative's ultimate responsibility to keep the Form U4 current and complete, particularly his/her employment and other business background.
Registered 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.
Jarrod James, Vice President of RIA Compliance Consultants, will be the featured speaker during our webinar, "Addressing Outside Business Activities and Conflicts of Interest," on Tuesday, September 15, 2009 from 12:00 p.m. to 1:00 p.m. CST.
Purchase your webinar seat for $59.95:
www.RIA-Compliance-Consultants.com/webinars.
There are two important regulatory reasons for monitoring outside business activities: (a) Form ADV disclosure purposes, and (b) Form U4 disclosure purposes. A registered 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 Form 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 Form ADV Part II need to provide detailed business background for the preceding five years. Finally, Item 7.C. of the Form ADV Part II may require the registered investment advisor firm to provide a description of the supervised person's outside activity and the amount of time spent on that activity.
In addition to disclosing outside activities on the Form ADV, investment advisor representatives ("IARs") must disclose their employment history for the previous 10 years and their current outside business activity on the Form U4. It is the investment advisor representative's ultimate responsibility to keep the Form U4 current and complete, particularly his/her employment and other business background.
Registered 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.
Jarrod James, Vice President of RIA Compliance Consultants, will be the featured speaker during our webinar, "Addressing Outside Business Activities and Conflicts of Interest," on Tuesday, September 15, 2009 from 12:00 p.m. to 1:00 p.m. CST.
Purchase your webinar seat for $59.95:
www.RIA-Compliance-Consultants.com/webinars.
Labels: Form ADV, IAR Licensing, Outside Business Activities, Webinar
posted by bhill at 6:17 PM
2009 IARD Annual Renewal and Form ADV Annual Amendment Requirements
Beginning Monday, November 10, 2008, investment advisor firms can access their 2009 Preliminary Renewal Statements via their IARD account. The Preliminary Renewal Statement must be paid, in full, by Friday, December 12, 2008. Because it takes approximately two days for payment to post to the IARD account, the funds should arrive no later than Wednesday, December 10, 2008, to ensure the money is posted to your IARD account by the 12th.
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 $450, 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 2009. You will also receive an Annual Amendment Questionnaire for you to complete so that we may prepare and file your Form ADV Part 1 Annual Amendment within the necessary timeframe.
Engagements received after November 15 are subject to availability so complete and return the Agreement for Services today! Click here to view the Agreement for Services.
*If you are an existing RIA Compliance Consultants hourly retainer client, you do not need to complete the Agreement for Services. Simply contact your lead consultant to sign-up for this service.
**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 877-345-4034.
Labels: Annual Amendment, Form ADV, IAR Licensing, IARD, Renewals
posted by bhill at 10:54 AM
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
Qualifications for IAR
As a follow-up to our previous entry, we thought we would discuss the general licensing qualifications that state regulators impose for investment advisor representatives. The following are the standard licensing requirements that states will accept as a qualification for investment advisor representative licensing:
1. Series 65, NASAA Uniform Investment Adviser Law Examination, or
2. Series 7, NASD General Securities Representative Examination, and Series 66 NASAA Uniform Combined State Law Examination, or
3. One of the following professional designations:
a. Certified Financial PlannerT, CFP®
b. Chartered Financial Analyst, CFA
c. Chartered Financial Consultant, ChFC
d. Personal Financial Specialist, PFS
e. Chartered Investment Counselor (CIC)
Many states accept additional qualifications, exemptions, and waivers. It is always best to refer to a specific state's regulations to determine its requirements. Some states do not even license advisor representatives. Currently, Michigan and Minnesota do not license advisor representatives; however, each state may require an advisor firm to disclose associated persons acting in an advisory capacity. New York does not license advisor representatives either; however, it does require state registered firms to report their advisor representatives and provide proof of qualification. A final state to note, Wyoming, does not regulate advisors at all. Advisor firms in Wyoming must be registered with the SEC.
1. Series 65, NASAA Uniform Investment Adviser Law Examination, or
2. Series 7, NASD General Securities Representative Examination, and Series 66 NASAA Uniform Combined State Law Examination, or
3. One of the following professional designations:
a. Certified Financial PlannerT, CFP®
b. Chartered Financial Analyst, CFA
c. Chartered Financial Consultant, ChFC
d. Personal Financial Specialist, PFS
e. Chartered Investment Counselor (CIC)
Many states accept additional qualifications, exemptions, and waivers. It is always best to refer to a specific state's regulations to determine its requirements. Some states do not even license advisor representatives. Currently, Michigan and Minnesota do not license advisor representatives; however, each state may require an advisor firm to disclose associated persons acting in an advisory capacity. New York does not license advisor representatives either; however, it does require state registered firms to report their advisor representatives and provide proof of qualification. A final state to note, Wyoming, does not regulate advisors at all. Advisor firms in Wyoming must be registered with the SEC.
Labels: IAR Licensing, Registration
posted by bhill at 10:31 PM
IAR Licensing
As the 2006 IARD renewals season quickly approaches, it is a good time to examine which associated persons of an investment advisor firm need to be licensed as investment advisor representatives.
SEC Rule 203A-3(a) of the Investment Advisers Act defines an investment advisor representative ("IAR") as a supervised person who has more than five clients who are natural persons and more than 10 percent of whose clients are natural persons. The IAR licensing responsibility has been given to the individual states which can impose registration, licensing, or other qualification requirements on associated persons that fall under the SEC definition of investment advisor representative and who have a place of business in the state or hold themselves out as advisor representatives in the state. In other words, under the Advisers Act, and the far majority of state regulations as explained below, an investment advisor representative of an SEC registered firm can have an unlimited number of clients in a state, without being licensed, as long as the advisor firm is notice filed in the state and the advisor representative does not have a place of business within the state.
Of course, these licensing/registration rules under the Investment Advisers Act of 1940 apply to only SEC registered firms. State registered firms must look to each state’s specific registration requirements to determine which associated persons must be licensed. In general, if an advisor firm is registered in a state, at least one associated person must license as an advisor representative. According to the NASAA web site, “most states follow a definition of investment adviser representative (IAR) similar to that in the Uniform Securities Act. An IAR generally is a person who, for compensation (1) makes any recommendations or otherwise renders advice regarding securities; (2) manages accounts or portfolios of clients; (3) determines which recommendation or advice regarding securities should be given; (4) solicits, offers, or negotiates for the sale of or sells investment advisory services, or (5) supervises employees who perform any of the foregoing.”
This notice is written based on the general industry licensing requirements. Of course, not all states follow these general guidelines, and many have implemented their own unique requirements or do not even license IARs. Whenever an advisor firm begins to conduct business in a state, it is imperative for the firm to have a specific understanding of the state’s licensing requirements. If you are unsure as to which of your associated persons should be registered or need clarification on a particular state’s licensing requirements, please give us a call.
SEC Rule 203A-3(a) of the Investment Advisers Act defines an investment advisor representative ("IAR") as a supervised person who has more than five clients who are natural persons and more than 10 percent of whose clients are natural persons. The IAR licensing responsibility has been given to the individual states which can impose registration, licensing, or other qualification requirements on associated persons that fall under the SEC definition of investment advisor representative and who have a place of business in the state or hold themselves out as advisor representatives in the state. In other words, under the Advisers Act, and the far majority of state regulations as explained below, an investment advisor representative of an SEC registered firm can have an unlimited number of clients in a state, without being licensed, as long as the advisor firm is notice filed in the state and the advisor representative does not have a place of business within the state.
Of course, these licensing/registration rules under the Investment Advisers Act of 1940 apply to only SEC registered firms. State registered firms must look to each state’s specific registration requirements to determine which associated persons must be licensed. In general, if an advisor firm is registered in a state, at least one associated person must license as an advisor representative. According to the NASAA web site, “most states follow a definition of investment adviser representative (IAR) similar to that in the Uniform Securities Act. An IAR generally is a person who, for compensation (1) makes any recommendations or otherwise renders advice regarding securities; (2) manages accounts or portfolios of clients; (3) determines which recommendation or advice regarding securities should be given; (4) solicits, offers, or negotiates for the sale of or sells investment advisory services, or (5) supervises employees who perform any of the foregoing.”
This notice is written based on the general industry licensing requirements. Of course, not all states follow these general guidelines, and many have implemented their own unique requirements or do not even license IARs. Whenever an advisor firm begins to conduct business in a state, it is imperative for the firm to have a specific understanding of the state’s licensing requirements. If you are unsure as to which of your associated persons should be registered or need clarification on a particular state’s licensing requirements, please give us a call.
Labels: IAR Licensing
posted by bhill at 10:14 PM
Licensing Maze - Investment Advisor Representative Registrations
Where do investment advisor representatives (IARs) need to be licensed?
According to Section 203A(b)(1)(a) of the Investment Advisers Act of 1940, SEC registered investment advisor firms are only required to license their investment advisor representatives in states where the investment advisor representatives have a place of business.
(For purposes of this section, the SEC has defined the term "place of business" to mean "an office at which the investment adviser regularly provides investment advisory services, solicits, meets with, or otherwise communicates with clients; and any other location that is held out to the general public as a location at which the investment adviser provides investment advisory services, solicits, meets with, or otherwise communicates with clients.")
In other words, an investment advisor representative (affiliated with an SEC registered investment advisor firm) may have more than 5 investment advisory clients in a state and not need to worry about being licensed in that state unless the investment advisor representative actually has a place of business or is actively holding himself out (i.e. advertising) in the state as an investment advisor. Of course, a firm may choose to still license the investment advisor representative. Also, the investment advisor firm must provide a notice filing in states where its investment advisor representatives exceed the de minimis exemption.
Despite the clarity of the Section 203A(b)(1)(a) of the Investment Adviers Act of 1940, the Texas Securities Board (among a handful of states) has taken a contrary position and requires all investment advisor representatives to provide a notice filing and pay a fee at just one client regardless of the representative's place of business and affiliation with an SEC registered firm.
Although the Investment Advisers Act of 1940 reduces the IAR licensing burden for SEC registered advisor firms, it does not apply to firms registered at the state level. State registered firms need to refer to the specific rules of each in state in which its representatives have clients. You can then determine if your representatives must be licensed or if only the firm will need to be registered.
If you have any questions on a state's licensing requirements, de minimis rules, exemptions, or just have a general concern about whether or not your firm is adhering to the registration rules, please give us a call.
According to Section 203A(b)(1)(a) of the Investment Advisers Act of 1940, SEC registered investment advisor firms are only required to license their investment advisor representatives in states where the investment advisor representatives have a place of business.
(For purposes of this section, the SEC has defined the term "place of business" to mean "an office at which the investment adviser regularly provides investment advisory services, solicits, meets with, or otherwise communicates with clients; and any other location that is held out to the general public as a location at which the investment adviser provides investment advisory services, solicits, meets with, or otherwise communicates with clients.")
In other words, an investment advisor representative (affiliated with an SEC registered investment advisor firm) may have more than 5 investment advisory clients in a state and not need to worry about being licensed in that state unless the investment advisor representative actually has a place of business or is actively holding himself out (i.e. advertising) in the state as an investment advisor. Of course, a firm may choose to still license the investment advisor representative. Also, the investment advisor firm must provide a notice filing in states where its investment advisor representatives exceed the de minimis exemption.
Despite the clarity of the Section 203A(b)(1)(a) of the Investment Adviers Act of 1940, the Texas Securities Board (among a handful of states) has taken a contrary position and requires all investment advisor representatives to provide a notice filing and pay a fee at just one client regardless of the representative's place of business and affiliation with an SEC registered firm.
Although the Investment Advisers Act of 1940 reduces the IAR licensing burden for SEC registered advisor firms, it does not apply to firms registered at the state level. State registered firms need to refer to the specific rules of each in state in which its representatives have clients. You can then determine if your representatives must be licensed or if only the firm will need to be registered.
If you have any questions on a state's licensing requirements, de minimis rules, exemptions, or just have a general concern about whether or not your firm is adhering to the registration rules, please give us a call.
Labels: IAR Licensing
posted by bhill at 9:48 PM
