The Division of Securities within the Colorado Department of Regulatory Agencies recently provided guidance to state-registered investment adviser firms who received Paycheck Protection Program (“PPP”) loans. Click here to review this guidance.
Does an Investment Adviser Representative Have to Disclose PPP Loan Forgiveness as a Compromise on Form U4?
April 17, 2020
As investment adviser firms start to receive loan proceeds through the Paycheck Protection Program (“PPP”), which is a loan program that originated from the Coronavirus Aid, Relief, and Economic Security (CARES) Act, many investment adviser firms have asked whether the forgivable nature of the PPP loan will constitute a compromise with a creditor for purposes of Item 14K of the Form U4 of an investment adviser representative who is a control person.
In April 2020, the New York Attorney General’s Investor Protection Bureau (IPB) proposed rule changes to 13 NYCRR Part 11. These rule changes would require the registration of investment adviser representatives through the IARD system. New York investment adviser representatives would be required to meet registration and exam requirements. Under the proposed rules, those who must be registered include individuals working for state or SEC-registered investment adviser firms. Currently, New York is the only state that does not license investment adviser representatives. The application for initial registration as an investment adviser representative would be made by completing the Form U4 and filing the form with the CRD/IARD. Click the following link to read the proposed rules in their entirety https://ag.ny.gov/sites/default/files/full-text-13nycrr11.pdf.
As we previously indicated in an article on June 28, 2013, Minnesota will soon begin requiring registration for investment adviser representatives located or conducting business in Minnesota. In order to register investment adviser representatives, investment advisers will have to file a Form U4 through Web CRD/IARD system. Investment adviser representatives will be required to meet the examination requirements defined in the law, the Series 65 examination or the Series 7 and Series 66 examinations, prior to being registered. The new law was effective August 1, 2013.
The Minnesota Department of Commerce – Securities Unit recently announced that during the last legislative session a bill was passed that has now been signed into law, resulting in changes to investment adviser representative (“IAR”) registration requirements. One of the significant changes that will likely impact many federally and state registered investment advisers, located or conducting business in Minnesota, is the requirement to register investment adviser representatives through the Web CRD/IARD system. Prior to this recent legislation, Minnesota did not have registration requirements for investment adviser representatives. However, Minnesota Statute 80A.58 Section 403(a) has now been revised to state, “It is unlawful for a person to transact business in this state as an investment adviser or investment adviser representative unless the person is registered under this chapter or is exempt from registration. . . .”
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.
August 07, 2012
The Investment Adviser Public Disclosure (“IAPD”) website was created by the U.S. Securities and Exchange Commission (“SEC”) to provide investors with information about their investment adviser and investment adviser representative. The IAPD was created as a result of a 1996 amendment to the Investment Advisers Act of 1940. The website provides information on both SEC and state registered investment advisers, certain investment adviser firms that are exempt from registration with the SEC or states, and state-registered investment adviser representatives.
Investment advisers are required to maintain current and accurate disclosures on their Form ADV documents and Form U4 – Uniform Application for Securities Industry Registration or Transfers Forms. The Form U4 and Form ADV each have sections that require disclosure of the same or similar information regarding the investment adviser and its investment adviser representatives. Examples of disclosure information that is required by both the Form U4 and Form ADV include educational and business background, outside business activities, and regulatory disclosures. If the information provided is inconsistent between the Form U4 and the Form ADV it can be an immediate red flag to regulators that an investment adviser is not maintaining current and accurate information as required. Not providing required disclosure information or failing to update the required information for the Form U4 or the Form ADV can result in regulatory violations and penalties. In order to avoid such regulatory violations and penalties, investment advisers and their investment adviser representatives must maintain the Form U4 and Form ADV documents to ensure that the information provided is current, accurate, and consistent at all times.
The Form U4, the Uniform Application for Securities Industry Registration or Transfer, is the form used by investment advisers, broker-dealers, or issuers of securities to register representatives in the appropriate jurisdictions and/or with the appropriate self-regulatory organizations. As a registered investment adviser, you must make the determination of which individuals in your firm will meet the definition of an investment adviser representative, complete a Form U4 for each individual, and submit it to the applicable state securities regulators in order for the investment adviser representatives to be properly licensed under the firm. However, it is important to understand that the obligation for completing the Form U4 does not stop once the investment adviser representative is licensed. Investment adviser representatives are obligated to amend and update the information required by the Form U4 as changes occur and not doing so can result in disciplinary actions.
Investment Advisers Should Consider Form U4 Obligations when Developing Written Supervisory Procedures
July 20, 2012
When a registered investment adviser is developing its ongoing compliance program, the investment adviser should develop written policies and procedures regarding the filing, retention and administration of an investment adviser representative’s Form U4.