Investment adviser representatives (IARs) follow essentially the same registration process as agents. In addition, the registration exemptions available to investment advisers also apply to IARs.
The disclosures and fees for an agent’s registration are the same for IARs. Use the link above for a full refresher. Here’s a summary of what’s requested on Form U4 (IARs use the same form) and the general requirements:
Once the required disclosures are made and the filing fee is paid, the state administrator grants effective registration (usually on the 30th day after filing). As with broker-dealers, agents, and state-registered investment advisers, IARs can’t imply that the administrator has approved them when discussing their registration.
IAR registration is different in two important ways:
First, the state administrator doesn’t require surety bonds for IARs. (Surety bonds may be required for broker-dealers, agents, and state-registered investment advisers.)
Second, IARs of federal-covered advisers only register in the state where they maintain an office.
For example, suppose an IAR works for a covered adviser with an office in Florida, but calls hundreds of potential retail clients in Alabama. That IAR registers in Florida only (no Alabama registration required).
This is drastically different* from agents and IARs of state-registered advisers. In the same scenario, both would be required to register in Florida and Alabama.
*Agents and IARs of state-registered advisers must register in any state they do business in unless an exemption exists (e.g., the institution exemption).
The notification process for an IAR’s termination is similar to what you saw for agents in a previous chapter, but there are a few key differences.
Form U5 is still used to notify the state administrator. The main difference is who files it. Here are the general rules:
IAR of a state-registered adviser
IAR of a federal-covered adviser
Unlike the broker-dealer/agent relationship (where both notify), with investment advisers and IARs it’s always one or the other.
When a termination occurs, the state administrator must be notified by the appropriate party “promptly.” The administrator will then cancel the IAR’s registration within 30 days of notification.
Even after the registration is canceled, the state administrator may still pursue punitive actions (e.g. a suspension or revocation*) for up to one year after the withdrawal.
For example, suppose an IAR committed an unethical act during employment, but the administrator didn’t discover it until after the IAR was terminated. The administrator can still impose discipline up to one year after the registration was withdrawn, even though the individual is no longer registered. Any disciplinary action would likely make it harder for the individual to re-enter the industry.
*A suspension is a temporary loss of registration, while a revocation is a permanent loss of registration. These punitive actions are covered in detail in a future chapter.
IARs receive three of the same exemptions available to investment advisers:
These are the same exemptions discussed earlier. Use the link above for a complete refresher.
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