The answers to these questions are general in nature (not state specific), are not intended as a comprehensive review of this topic and do not include or account for all of the exceptions or variances involved in filing a Form U4 to register an individual as an investment adviser representative of a registered investment advisor firm.
The Form U4 is the Uniform Application for Securities Industry Registration or Transfer. Individuals seeking to register as an investment adviser representative (“IAR”) of a registered investment advisor firm typically must use this form to become registered with a state securities regulator. This document is filed electronically via the Central Registration Depository (“Web CRD”) system.
An individual seeking to register as an investment adviser representative with a state securities regulator will file an initial Form U4 via the IARD/Web CRD system. Typically, an individual does not submit his or her Form U4 until he or she has met the testing/designation prerequisite required by the state securities regulator. (An individual not currently registered with an investment advisor firm or broker-dealer will utilize the Form U10 online to open a Series 65 examination window; an individual currently registered with an investment advisor firm or broker-dealer will open the Series 65 examination window by submitting the Form U4.) In the event that the individual seeking to register as an investment adviser representative is also starting a state registered investment advisor firm, the Form U4 is often submitted at the same time the Form ADV and other registration documents are submitted to the state securities regulator since most state securities regulators require an investment advisor firm to have at least one individual registered as an investment adviser representative.
No. Although in the past there were several states that did not require individuals to register as investment adviser representatives by filing a Form U4, this is no longer the case. As of February 1, 2021, all states now require the filing of the Form U4 to register individuals as investment adviser representatives of an investment adviser firm, provided that the individual meets the state’s definition of investment adviser representative. An investment advisor firm should consult the particular investment adviser representative rules of the securities regulator(s) in any state where the representative will conduct business.
New York is the final state to require filing of the Form U4 to register investment adviser representatives. While new investment adviser representatives in New York must register via Form U4 beginning February 1, 2021, the state has implemented a transitional period for existing investment adviser representatives in New York who need to come into compliance with the new requirement. Individuals who were acting as investment adviser representatives (prior to February 1, 2021) will have until December 2, 2021 to comply with the registration requirement and may seek a waiver of the examination requirement under certain circumstances. However, existing investment adviser representatives must submit a Form U4 requesting investment adviser representative registration in New York on or before August 31, 2021. (Please refer to New York’s final adopted rule for more details.)
For more information regarding New York’s new investment adviser representative registration requirement, including who must register, deadlines, examination requirements and waivers, and how to register, click here.
The Form U4 is submitted electronically to the state securities regulator by the investment advisor firm on behalf of the investment adviser representative through the investment advisor firm’s IARD/CRD account.
The following is a list, not necessarily in order of the form, of information that needs to be provided by the investment adviser representative when completing a Form U4:
Although most state securities regulators do not require an investment adviser representative only applicant to submit fingerprint cards, the state securities regulators for Alaska, Arizona, District of Columbia, Georgia, Florida, Indiana, Maine and Ohio require fingerprint cards when registering as an investment adviser representative. In order to confirm whether a fingerprint card is required, an investment adviser representative applicant should review the most recent investment adviser representative registration requirements published by the applicable state securities regulator where he or she is requesting registration.
Whenever there is a material change to information that should be disclosed on the Form U4, the investment adviser representative has an obligation to update promptly that information. 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.
Examples of information requiring an amendment to an investment adviser representative’s Form U4 are as follows:
Not providing proper disclosure for any information on the Form U4 may result in various sanctions including, but not limited to, fines, suspensions, or even being barred from acting as an investment adviser representative.
If the answers to any disclosure questions (i.e. criminal actions, regulatory disciplinary actions, customer complaints, arbitrations, civil litigation, termination, financial matters) on the Form U4 are “yes”, then the investment adviser representative is required to disclose additional details of the event or proceeding on the appropriate Disclosure Reporting Page (“DRP”) to the Form U4. Each category of items listed above has a unique DRP page asking for particular details of the disclosure event. Certain disclosure events will require multiple DRP updates. For example, when a matter arises (i.e. complaint received arbitration or litigation served, bankruptcy petition filed) and upon a change in the status or at final disposition of the matter (i.e. complaint settled, arbitration order issued, litigation settlement, bankruptcy discharged).
As a general rule, when an investment adviser representative leaves an investment advisor firm, the former investment advisor firm will typically have 30 days to file a Form U5 disclosing the termination of the departing individual’s affiliation as an investment adviser representative with the former investment advisor firm. The Form U5 must disclose why the departing individual left the investment advisor firm and other certain events, and the former investment advisor firm is under a continuing obligation to amend and update Section 7 (Disclosure Questions) of the Form U5 until final disposition. (A checklist of certain issues to consider when preparing to terminate an investment adviser representative and filing a Form U5 can be purchased from RIA Compliance Consultants at https://www.ria-compliance-consultants.com/product/rep-term-checklist/ ) The new investment advisor firm that the departing individual subsequently joins will file a Form U4 registering the individual as an investment adviser representative of the new investment advisor firm. (A checklist of certain issues to consider when affiliating with a prospective investment adviser representative and filing a Form U4 can be purchased from RIA Compliance Consultants at https://www.ria-compliance-consultants.com/product/rep-prospective-rep-checklist-compliance-issues/ ) As long as the individual registering as an investment adviser representative has not gone more than 2 years between registrations as an investment adviser representative and there are no “yes” answers, the state securities regulator will typically approve the transfer once the previous firm has filed the Form U5.
Since the state securities regulator usually provides the former investment adviser firm with a 30 day window to file the Form U5 and the state securities regulator will not typically review/approve a transfer until after the Form U5 is filed, there is a risk that individual will not be able serve as an investment adviser representative on his or her first day with the new investment advisor firm.
There may be application fees associated with registering with the new investment advisor firm. Please refer to the applicable state securities regulator for more information.
The filing/submission of a Form U4 application on the CRD system can be detected by the current broker-dealer before the Form U4 has been approved by the securities regulator. When a new investment advisor firm merely files a new Form U4 application in the CRD system under a specific individual who is already licensed as a registered representative at a broker-dealer, it’s been the experience of RIA Compliance Consultants that the current broker-dealer is able to view such activity in the CRD system or receives an alert of such filing via the CRD system.
With respect to whether a current investment adviser firm (as opposed to a broker-dealer) will be notified via the CRD system of the mere filing/submission of the Form U4 of its existing investment adviser representative by a new investment adviser firm, RIA Compliance Consultants cannot offer any definitive guidance on this question. However, once a securities regulator has approved a Form U4 filing, this will become a public record accessible via the Investment Adviser Public Disclosure (“IAPD”) website.
A departing investment adviser representative should consult with local legal counsel regarding his or her legal obligations to the current/former investment advisor firm prior to preparing and filing the Form U4 with a new investment advisor firm. RIA Compliance Consultants, Inc. is not a law firm and does not provide legal advice regarding the obligations of a departing investment adviser representative to his or her current/former firm.
The Investment Adviser Public Disclosure (“IAPD) database allows public users to search for investment adviser representatives. The information published by the IAPD about the investment adviser representative includes qualifications, such as licenses, professional designations, and any exams passed; previous employment, including a list of firms where the investment adviser representative was previously registered, as well as any employment within the last ten years both inside and outside the securities industry; and a disclosure section which details any customer disputes or disciplinary events on the investment adviser representative’s record. The published information about the investment adviser representative is obtained through Form U4. Both the investment advisor firm and investment adviser representative are required to ensure the information on the Form U4 is accurate and up-to-date.
The Form U5 is the Uniform Termination Notice for Securities Industry Registration. Investment advisor firms must use the Form U5 to terminate with a state securities regulator the registration of an individual serving as an investment adviser representative. Similar to the Form U4, the Form U5 is filed electronically via the Web CRD.
Whether an individual can be dually licensed an Investment Adviser Representative (“IAR”) with multiple investment adviser firms depends upon the state. Most state securities regulators allow dual IAR licensing; however, several state securities regulators limit dual IAR licensing to when investment adviser firms are under common ownership and control. State securities regulators permitting dual IAR licensing may require additional forms to be completed and other representations to be made.
There are other states which generally prohibit an individual from being dually licensed as an Investment Adviser Representative with multiple investment adviser firms, but some of these state securities regulators may grant an exception permitting dual IAR registration on a temporary basis during an Investment Adviser Representative’s transition from one investment adviser firm to another. For a sample letter to the regulator, please visit our online store.
Dual IAR registration creates a risk of client confusion as to the investment adviser firm which is providing the service, and consequently, the dually licensed Investment Adviser Representative and each investment adviser firm should take steps to clarify the role of each party and properly identify the responsibilities/limitations of each party.
The following are posts and products of RIA Compliance Consultants related to an investment adviser representative’s Form U4 and Form U5:
What Information Does an Investment Adviser Representative Include on His or Her Form U4? (Access Limited to Annual Compliance Program Clients)
*The information contained in this Frequently Asked Questions webpage is general in nature and intended for educational purposes only and is not intended to be a comprehensive analysis of the securities regulations applicable to registered investment advisers. It is not intended to constitute compliance consulting advice or apply to any particular investment adviser firm’s specific situation. For more information, please see our Disclosures.