Registration and Post-Registration

This section covers IAR registration requirements, qualification exams, de minimis exemptions, Form U4 amendments, books and records, continuing education, and supervision of IARs.

Registration Requirements

IARs always register with states, never with the SEC. Even if the employing IA is federally registered (SEC-registered), the IAR registers at the state level.

• How: File Form U4 (Uniform Application for Securities Industry Registration or Transfer) through the IARD (Investment Adviser Registration Depository) system
• The investment adviser firm (not the individual IAR) submits the Form U4 on behalf of the IAR

Registration Authority: Which State?

• An IAR must register in the state where the IAR has a place of business
• For IARs of state-registered advisers: register in each state where the IAR has a place of business
• For IARs of federal covered advisers: register in each state where the IAR has a place of business (states retain authority to require registration of IARs even when the adviser itself is federal covered)

Exam Tip: Gotchas

• Federal covered advisers register with the SEC, but their IARs must still register with each state where they have a place of business. States retain jurisdiction over IARs regardless of whether the adviser is state-registered or SEC-registered.

Qualification Exams

To register as an IAR, an individual must pass a qualifying examination:

Professional Designation Waivers

The following designations waive the Series 65 exam requirement:

• CFA - Chartered Financial Analyst
• CFP - Certified Financial Planner
• ChFC - Chartered Financial Consultant
• PFS - Personal Financial Specialist
• CIC - Chartered Investment Counselor
• CIMA - Certified Investment Management Analyst

Key rules for designation waivers:

• The designation must be currently held and in good standing to qualify for the waiver
• The waiver applies only to the Series 65 exam requirement, not to state registration itself
• The IAR must still file Form U4, pass a background check, and pay state fees

Exam Tip: Gotchas

• A qualifying designation waives only the exam, not the registration. If the designation lapses, the waiver is no longer valid and the individual would need to pass the exam.

Activities Requiring Registration

The following activities require IAR registration:

• Making investment recommendations to clients
• Managing client accounts or portfolios
• Determining which advice should be given to specific clients
• Soliciting or selling investment advisory services
• Supervising persons who perform any of the above

Exclusions from Registration

The following individuals are NOT required to register as IARs:

• Clerical and ministerial personnel who do not perform advisory functions
• Under the federal definition (SEC Rule 203A-3): supervised persons of federal covered advisers who do not regularly solicit, meet with, or communicate with clients
• Persons providing only impersonal investment advice (e.g., written publications of general circulation not tailored to individual clients)

De Minimis Exemption

An IAR who does not have a place of business in a state may be exempt from registration in that state if the IAR has fewer than 6 clients who are residents of that state during the preceding 12-month period.

Key points:

• Institutional clients generally do not count toward the client threshold
• The exemption requires both conditions: (1) no place of business in the state AND (2) fewer than 6 resident clients
• Having even one office or regularly meeting clients in the state eliminates the exemption regardless of client count

Exam Tip: Gotchas

• The de minimis exemption has two requirements that must both be met. Having a place of business in a state means you must register there even if you have only 1 client.

Post-Registration Requirements

Form U4 Amendments and Disclosure of Reportable Events

IARs have a continuing obligation to amend Form U4 whenever disclosed information changes.

Reportable events that require prompt Form U4 amendment:

Important disclosure rules:

• All felonies must be disclosed (no time limit)
• Securities-related misdemeanors must be disclosed (no time limit)
• Disclosure is required for charges, not just convictions
• Filing misleading information or omitting material facts on Form U4 can result in denial, suspension, or revocation of registration

Exam Tip: Gotchas

• Form U4 requires disclosure of criminal charges, not just convictions. An IAR charged with a felony must disclose it within 10 days, even before trial.
• A felony later reduced to a misdemeanor or dismissed must still be reported as originally charged.

Books and Records

Investment advisers must maintain books and records related to their IARs' activities.

Required records include:

• Client communications (emails, letters, advertising materials)
• Trade records and account documentation
• Advisory contracts and written agreements
• Financial planning documents provided to clients
• Evidence of supervisory reviews

Records must generally be maintained for 5 years (first 2 years in an easily accessible place).

Registration Maintenance

IARs must maintain their registration by:

• Keeping Form U4 current with prompt amendments
• Completing applicable continuing education requirements
• Paying annual registration renewal fees
• Remaining associated with a registered investment adviser

Continuing Education (CE) Requirements

The IAR Continuing Education (CE) Model Rule (Model Rule 204(b)(6)-CE) was adopted in November 2020. States must individually adopt the model rule for it to apply to IARs in that state.

CE Credit Requirements

• 1 credit = at least 50 minutes of educational instruction
• Reporting period = 12-month calendar year (January 1 - December 31)
• CE must be completed through an Authorized Provider

CE Compliance Alternatives

Consequences of Non-Completion

• IAR who fails to complete CE by end of reporting period renews as "CE Inactive"
• CE Inactive status: IAR cannot perform advisory functions until CE is completed
• IAR who remains CE Inactive at the close of the next calendar year is not eligible for registration or renewal
• No carry-forward: excess credits in one period cannot be applied to a subsequent period

Unregistered Periods

• An IAR who was previously registered and became unregistered must complete CE for all reporting periods between de-registration and re-registration
• Exception: the IAR can satisfy this by retaking and passing the qualifying exam (e.g., Series 65) instead of completing back CE

Exam Tip: Gotchas

• CE credits do NOT carry forward. Completing 18 credits in one year does not reduce the 12-credit requirement for the following year.
• An IAR who lets their registration lapse must either complete all missed CE or retake the qualifying exam.
• FINRA dual registrants get a partial exemption. FINRA CE counts for Products/Practice only, not Ethics.

Supervision of IARs

The investment adviser firm is responsible for supervising its IARs.

Supervision requirements include:

• Establishing and enforcing written supervisory procedures
• Designating a supervisor responsible for each IAR's activities
• Conducting periodic reviews of client accounts handled by IARs
• Reviewing and approving advertising and client communications
• Monitoring for conflicts of interest and suitability of recommendations

The IA firm is liable for the acts of its IARs performed within the scope of employment or authority. A firm that fails to reasonably supervise an IAR can face administrative sanctions including censure, fine, suspension, or revocation of registration.

Exam Tip: Gotchas

• Supervision is the investment adviser firm's responsibility, not the IAR's. The firm cannot escape liability by claiming it delegated supervision to someone who failed to perform it.