Investment adviser representatives (IARs) go through essentially the same registration process as agents. In addition, the registration exemptions that apply to investment advisers also apply to IARs.
The disclosures and fees for an agent’s registration are the same for IARs. For a full refresher, use the link above. 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 register only 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 very different from agents and IARs of state-registered advisers. In the same scenario, both would need 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 agent’s termination was covered in a previous chapter. The IAR process is similar, with a few key differences.
Form U5 is still used to notify the state administrator, but who files it depends on whether the adviser is state-registered or federal-covered:
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 party 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 Even after the registration is withdrawn, the administrator may still pursue punitive actions (for example, a suspension or revocation*) for up to one year after the withdrawal.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 discipline imposed would likely make it harder for the individual to reenter 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 covered earlier. Use the link above for a complete refresher.
Registered individuals (agents and IARs) must maintain current, industry-related knowledge. In addition to passing licensing exams, they must complete continuing education (CE).
The North American Securities Administrators Association (NASAA) imposes annual CE requirements for IARs. The requirements are:
IAR Regulatory and Ethics Content
IAR Products and Practice Content
*NASAA defines a credit as at least 50 minutes (roughly 1 hour) of educational instruction.
**IAR Products and Practice Content is not required for IARs dual-registered as agents because this information is covered in agent-based CE (discussed below).
IAR CE is delivered by training organizations that NASAA calls “authorized providers.” The authorized provider reports CE completion, but the IAR is responsible for confirming the report was received. CE must be completed annually; if it isn’t, the IAR becomes ineligible to renew registration.
Agents also have annual CE requirements, but those are imposed by the Financial Industry Regulatory Authority (FINRA), not NASAA. Because you’re preparing for a NASAA exam, you’re unlikely to see test questions on agent CE requirements.
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