Status Changes and Termination
When an investment adviser representative (IAR) begins or ends employment, specific notification requirements apply. Who must notify the Administrator depends on whether the IAR works for a state-registered investment adviser (IA) or a federal covered adviser.
Notification When an IAR Begins or Terminates Employment
The Uniform Securities Act (USA) distinguishes who bears the notification obligation based on the type of IA:
| IA Type | Who Must Notify the Administrator? |
|---|---|
| State-registered IA | The investment adviser (the firm) must promptly notify |
| Federal covered adviser | The investment adviser representative (the individual) must promptly notify |
Why the difference? A state-registered IA is already registered with the state, so the firm handles notifications for its personnel. A federal covered adviser is not registered with the state, so the individual IAR must notify the Administrator directly.
Form U5: Uniform Termination Notice
When an IAR is terminated from an IA, the IA files Form U5 (Uniform Termination Notice for Securities Industry Registration) through the Investment Adviser Registration Depository (IARD) system.
Filing requirements:
- Must be filed within 30 days of the IAR's termination
- Filed by the IA firm, not the departing IAR
Form U5 requires the IA to disclose:
- The reason for termination: voluntary, permitted to resign, discharged, deceased, or other
- Whether the termination was related to violations of investment-related laws, failure to supervise, fraud, or customer complaints
- Any internal review findings that contributed to the termination
The IAR has the right to add a comment to the Form U5 if the IAR disagrees with the IA's characterization of the termination.
Exam Tip: Gotchas
- "Permitted to resign" is NOT the same as a clean voluntary resignation. If an IA allows an IAR to resign rather than be fired due to misconduct, the IA must disclose this on Form U5. A firm that lets an employee quietly resign to avoid the embarrassment of termination must still disclose the circumstances.
Continuing Obligation After Termination
The IA's obligation to update Form U5 continues even after the initial filing:
- If new information surfaces after the Form U5 is filed (for example, a customer complaint is received after the IAR has departed), the IA must amend the Form U5
- The continuing obligation runs until final disposition of all reportable matters