Investment Adviser Representatives Must Register Under New York Law Effective February 1, 2021

Tarter Krinsky & Drogin LLP

The Investor Protection Bureau (IPB) of the New York State Attorney General’s office is slowly modernizing the state’s securities laws to reconcile with changes under Federal law. As part of this effort, beginning on February 1, 2021, investment adviser representatives must register under New York State law. The changes and implementation dates are outlined below.

Does This Change Apply to My Investment Advisory Firm?

The rule change applies to New York State registered investment advisers. The change also applies to any investment adviser representative of an SEC-registered investment adviser with a place of business in the state.

Who Is an Investment Adviser Representative?

An investment adviser representative is vaguely defined as any natural person who represents an investment adviser in performing the acts that make such a firm an investment adviser. Principals of an investment adviser and supervisors who directly supervise investment adviser representatives must also register like investment adviser representatives.

For an SEC-registered investment adviser, an investment adviser representative is generally any supervised person representing such an SEC-registered investment adviser from a place of business in New York State that also falls within the Investment Advisers Act Rule 203A-3 including:

  • has more than five clients who are natural persons; and
  • more than 10% percent of the person’s clients are natural persons who are “qualified clients” (e.g., clients with more than $1 million in assets under management or $2.1 million in net worth).
What Must I Do to Register Investment Adviser Representatives?

Investment advisers register investment adviser representatives by filing Form U-4 with the CRD/IARD system.

What Are the Exam Requirements?

Each investment adviser representative must pass the Series 65 or the Series 7 and Series 66 examinations on or before December 2, 2021 or otherwise obtain a waiver for such exam requirement.

An investment adviser representative who has been continuously registered in any jurisdiction for at least two years with no regulatory or civil action, proceeding or arbitration in the proceeding ten years is exempt from the exam requirements. Furthermore, certain persons who have otherwise been engaged in activities as an investment adviser representative in New York State during the prior two years may have the exam requirements waived upon approval of the IPB. Finally, persons with certain enumerated professional designations in good standing, such as certified financial planners are exempt from the exam requirements.

All principals, supervisors and investment adviser representatives of any investment adviser registered in New York State before February 1, 2021 should have already satisfied the pre-existing examination and/or waiver requirements through the Form NY-IAQ process. However, a U-4 filing is still required for each such person.

What Is the Deadline to Register Investment Adviser Representatives?

The rule is effective as of February 1, 2021. However, investment advisers have until August 31, 2021 to make the required filings for pre-existing investment adviser representatives. Investment adviser representatives have until December 2, 2021 to pass the requisite exams.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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