Source: https://registeredadvisorservices.com/faqs/
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FAQ's - Registered Advisor Services
Who must register as an investment advisor?
Does the SEC or States have filing requirements?
What exams are required to become an Investment Advisor Representative (“IAR”)?
Transitioning from SEC to state registration
My firm is currently SEC registered but does not have $100 million in assets under management. What do I do?
How do I register for either exam?
Do I have to amend my Form ADV Part II and Schedule F or Brochure?
What do I do if my firm hires an individual to provide investment advice to clients?
I need to schedule an exam for an individual in my firm, how do I do this?
Initial Registration Process:
Section 202 of the Investment Advisers Act of 1940 defines an Investment Adviser as any person or firm that, for compensation, (1) engages in the business of advising others, either directly or through publications or writings, as to the value of securities or as to the advisability of investing in, purchasing, or selling securities or (2) that, for compensation and as part of a regular business, provides analysis concerning securities, must be registered as an investment advisor. There are certain exclusions from the definition, which mostly exclude individuals and firms that provide only incidental advice.
Under the previous regulations that ended in July 2011, investment advisors who believe they will have less than $25 million in assets under management within four months of their firm-approval must register with the state regulators. You register your firm in the state that you have your principal place of business. Once a state Registered Investment Advisor‘s assets under management exceed $30 million, they must register with the SEC. Investment Advisors who believe they will have between $25 and $30 million in assets under management within four months of their firm approval may register with the SEC.
The Financial Reform bill approved by Congress and signed into law by the President on July 21, 2010 changed the threshold for SEC registration as of July 2011. At that time, an RIA will need to have $100 million or more in regulatory assets under management in order to register with the SEC. Otherwise, you will register with the state or states in which you have a place of business or where you have a certain number of clients (see below). If you are state registered and exceed $30 million, but not $100 million, in assets under management prior to July 2011, the SEC will not require you to migrate to SEC registration. Rather, you will be able to stay state registered as if the new regulations were in effect.
There are some exemptions that enable advisors with less than $25 million in assets under management to register with the SEC.
To learn more about these exemptions, please contact us at (603) 292-6772.
If you are a state registered RIA, the primary state where you file will be your home state where your office is located and where you conduct your advisory practice. As your business grows and you add clients in other states, the general rule is that you are allowed to have up to five clients in each of the other states without having to make any filings or pay any fees (unless you have a place of business in that state – in which case you need to register in that state). However, before you take on your sixth client in any state, you will need to register and be approved by the state. Four states do not recognize the five-client allowance. They are Nebraska, New Hampshire, Louisiana, and Texas. The process varies across these states, but all four require some level of registration and payment of fees right from the first client.
The registration process, including entitlement and Form ADV filing, generally will take between six and eight weeks, depending on the complexity of the services offered by your firm and the backlog of pending applications at the various regulatory agencies. At both the SEC and state level, the regulators have between six and eight weeks from the date your application is submitted to respond to us with questions about the pending application. Our goal is to respond as quickly as possible to the regulator to help keep the process moving forward.
Form ADV is the form investment advisors must complete in order to become registered with either the SEC or the state regulators. Form ADV explains to the regulators how you intend to run your business and your Brochure is the document you provide to your prospective clients so they too may understand how your firm operates.
The ADV Part 2A is your Brochure and the ADV Part 2B is your Brochure Supplement that you will provide to prospective clients explaining how your firm operates. Annually, you are also required to provide a copy of these documents to your existing clients as well.
Form ADV Part II and Schedule F/New Brochure (ADV Part 2A and 2B)
Individuals considering registration of a new firm should be aware that the SEC has recently made revisions to the ‘check the box’ format of the existing Form ADV Part II to require investment advisors as of 2011, who are initially registering a new firm or for firms currently registered to prepare a narrative brochure within the SEC’s new guidelines. For firms registering for the first time, that brochure will be uploaded onto the IARD system at the time your registration is submitted to the regulator. For existing firms, that brochure will need to be prepared in accordance with the new SEC rule and uploaded onto the IARD system 90 days from the firms fiscal year end in 2011. Both new and existing firms will also be required to file a Brochure Supplement on the IARD system for each of their supervised persons. There are exceptions to this requirement. Part of the SEC’s purpose of revising this document is to promote effective communication between the investment advisor and your clients. For more information about this important regulatory change, please contact us at (603) 292-6772.
Currently, the only filing requirement for firm’s registering with the SEC is to file the Form ADV Part 1 and the ADV Part 2A Brochure through the IARD system and pay the SEC and state notice filing fees. You will also be required to register an Investment Advisor Representative with the state where your firm has its principal place of business.
For firm’s registering with the state regulators, typically, the states do have particular filing requirements. Each state is slightly different in their requirements. To learn more about how we may assist you through the registration process, please either complete the adjacent form or call us at (603) 292-6772.
Yes. The regulators require that you have in place your firm’s policies and procedures written, so that all of your employees have an understanding of how the firm is to operate as of the day your firm becomes registered. You are also required to have a Privacy Policy, Code of Ethics and Business Continuity Plan. Some investment advisors may also be subject to the Massachusetts Identify Theft requirements for their Massachusetts clients. For more information on any of these topics, please either complete the adjacent form or call us at (603) 292-6672.
To establish an investment advisory firm, all individuals involved with providing investment advice to your clients must pass a Uniform Advisor Exam or qualify for an exemption. The exam options include the Series 65 (“Uniform Investment Advisor Exam”) and the Series 66 (Uniform Combined State Law Exam). Advisor applicants who have an active Series 7 exam (no longer than 2 years unaffiliated with a broker-dealer), may opt for the Series 66 exam instead of the Series 65 exam. The Series 66 is narrower in scope and therefore less difficult.
No. You do not need to be sponsored by a broker-dealer to take the Series 65 or Series 66 exams. These exams were developed by the North American Securities Administrators Association (“NASAA”) to test competency. The exams are only administered through FINRA.
Yes. Certain professional designations, held in good standing and reported to FINRA, such as Certified Financial Planner (“CFP”), Chartered Financial Analyst (“CFA”), Personal Financial Specialist (“PFS”), Chartered Financial Consultant (“ChFC”) or Chartered Investment Counselor (“CIC”) will typically enable an advisor to request an exemption from the exam requirements in many states. The applicant is still required to apply for registration as an IAR by filing a Form U4 and paying the associated registration fees to the applicable state securities regulator. To discuss your unique situation, please either complete the adjacent form or call us at (603) 292-6772.
If your exam was initiated by filing a Form U-10, your current employer will not be immediately notified of your taking the examination. If your examination is prompted by a Form U-4 filing on the CRD system, your existing firm will be notified to request a transfer out of the old firm via a Form U-5. Registered Advisor Services professionals will help you to manage the timing and sequence of events to avoid premature interruption of your employment and to enable you to inform your employer before the FINRA system notifies them. To discuss your unique situation, please either complete the adjacent form or call us at (603) 292-6772. All inquiries are held in strict confidence.
As previous mentioned, the Financial Reform bill signed into law by President Obama on July 21, 2010 changes the threshold for SEC registration of RIAs to $100 million or more in regulatory assets under management. If you are a mid-sized adviser registered with the SEC on July 21, 2011 you must maintain your SEC registration and comply with the Advisers Act until January 1, 2012, unless you file a “full withdrawal” on Form ADV-W to withdraw from registration in all of the jurisdictions with which you are registered (or have an application for registration pending). However, you may not switch to state registration until after January 1, 2012.
If you are registered or have an application for registration pending with the SEC on January 1, 2012, you must file an amendment to Form ADV no later than March 30, 2012. You must update your responses to all items including the reporting of your regulatory assets under management determined within 90 days of the filing. If you are no longer eligible for SEC registration, you must mark the appropriate question on Form ADV.
If you are no longer eligible for SEC registration you must timely withdraw your registration by filing Form ADV-W.
For more information on this process, please complete the adjacent form, or call us at (603) 292-6772.
To register for the Series 65 or Series 66 exam, you must complete a Form U-10 and submit the form to FINRA. Submission can be either completed and paid online or printed and mailed along with a check or money order directly to FINRA.
You may schedule your examination immediately following the opening of your examination window (“enrollment period”). Once FINRA processes your Form U-10, they will notify you of your enrollment period which is 120 days (4 months). Upon receipt of your enrollment confirmation from FINRA, you may contact a testing center in your area to schedule the exam. You may only take an examination once per enrollment. If you do not pass the exam, you may re-submit a Form U-10, along with the fee, for re-testing.
The Series 65 exam costs $155 and the Series 66 exam costs $145. Fees are non-refundable by FINRA (FINRA administers the testing process on behalf of NASAA).
There are testing facilities near all major cities and throughout the United States (and some international as well). Testing Centers are sub-contracted through Pearson Professional Centers or Prometric Testing Centers.
The Series 65 exam consists of 130 questions (plus 10 pre-test questions) covering relevant topics around providing investment advice to clients, such as Economics, Investment Vehicles, Investment Recommendations and Strategies, and Legal and Regulatory Practices. Applicants are allowed 180 minutes to complete the examination. The Series 65 Exam Outline can be found on the NASAA.org site.
The Series 66 exam consists of 100 questions (plus 10 pre-test questions) covering relevant topics around providing investment advice to clients, such as Economics, Investment Vehicles, Investment Recommendations and Strategies, and Legal and Regulatory Practices. Applicants are allowed 150 minutes to complete the examination. The Series 66 Exam Outline can be found on the NASAA.org site.
There are several providers of training materials and classroom studies, including reference books, practice tests, and other materials. Please contact us by either completing the adjacent form or call us at (603) 292-6772.
For the Series 65 exam, a score of 72% or greater (94 of 130 questions correct) is required to pass. For the Series 66 exam, a score of 75% or greater (75 of 100 questions correct) is required to pass. However, some states do require certain scores of up to 85% to be eligible for registration as an IAR. Note that the Series 65 exam and the Series 66 exam have 140 and 110 questions, respectively, but 10 of the questions do not count towards your scoring. This information is updated as of January 1, 2011.
Registered Advisor Services can assist with any of your questions, whether related to the registration process or ongoing compliance services. Please contact us at (603) 292-6772 and our experienced professionals will take you through the process so you have a good understanding of the process to begin your new advisory firm.
Your Form ADV Part 1 needs to be amended at least on an annual basis. However, during the year if your business model changes, you may be required to amend your Form ADV Part 1 as well as your ADV Part 2A Brochure and/or ADV Part 2B Brochure Supplement.
You file all amendments to your Form ADV on the Investment Advisor Registration Depository (“IARD”) system.
Do I have to amend my Form ADV Part 2A Brochure and/or ADV Part 2B Brochure Supplement?
You are required to perform an annual review of your Form ADV Part 2A and Part 2B to be certain the information is still current. If your business model changes after your annual review, you would need to amend your document as well.
Annually, you are required to submit an annual updating amendment to your Form ADV Part 1 on the IARD system. As previously stated, you are also required to review and update your Form ADV 2A Brochure and Form ADV 2B Brochure Supplement. Those documents are required to be filed on the IARD system. Filing requirements for the Form ADV 2B Brochure Supplement vary for SEC registered investment advisors.
Most states require firms to file a Form U4 for your Investment Advisor Representatives (“IAR”) who will be providing investment advice to your clients. This is true for both state and SEC registered investment advisor firms.
To learn more information about any of these topics and other important ongoing compliance requirements, please either view our ongoing compliance section, or contact us at (603) 292-6772.
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