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FAQs

Our Frequently Asked Questions section will give you a taste of what to expect before and after becoming a registered investment advisor, as well as useful things to know about the Series 65 exam. Once you review the questions others have asked, contact us for further guidance.

An individual or firm that receives compensation by providing advice or analysis regarding securities or securities markets and makes recommendations to an individual based on the knowledge they have. An investment advisor is one who provides regular investment advice and/or financial planning advice to clients for a fee.Note: The different spellings of the words should not confuse you. The words both mean the same thing. The spelling “advisor” is the one most frequently used in the financial industry. The word spelled as “adviser” is used by Congress. Not to be confused, both can be used interchangeably.

An IAR is an individual who registers to do business as an investment advisor under an RIA (firm). An investment advisor representative is generally defined as an individual, who for compensation, a) determines and makes recommendations regarding investment opportunities; b) manages client assets; c) sells and/or solicits advisory services; and d) conducts self in a supervisory position to those who provide the above-listed services. The rules and regulations relative to each state should be reviewed and state regulators should be consulted with as it pertains to each individual. The definition of an IAR can vary from state to state, specifically with respect to soliciting activities. Most states will require an individual to register as an IAR within the applicable state where the primary business is conducted and/or has a specific number of clients that requires registration.In most states, regulators require that a registered RIA have at least one IAR whom is registered. At the time the registration is submitted on behalf of a firm, state regulators will require the appropriate documents be filed for an individual, simultaneously with the registration material of the firm filing for approval. If the firm is an SEC registered firm, there is no requirement that an IAR be affiliated with it. However, SEC firms will be notice filed with the home state of the firm and upon review, state securities will see that no individual has registered as an IAR and then will require that the firm have a registered representative on behalf of the firm in the applicable state.

In order to register and/or qualify for registration as an IAR you must successfully complete the Series 65 examination (Series 65). There are exceptions and exemptions to this requirement. If an individual currently holds and maintains in good standing the following certifications, most states will waive the passing of the Series 65. (Note: an individual does not need to have a sponsoring firm to open a test window or to sit for the Series 65. This differs from the requirements of taking the Series 7 exam.) These certifications include:

  • Certified Financial Planner (CFP)
  • Chartered Financial Analyst (CFA)
  • Financial Specialist (PFS)
  • Charter Financial Consultant (ChFC)

Other exceptions may include an individual’s prior financial industry experience. State securities regulators may accept other professional designations, however for those designations; an individual must request a waiver in writing from. This will then be reviewed by the applicable state regulators. (See the frequently asked questions specific to the Series 65 examination for more information relating to this topic.)

There are differences when registering with the SEC or within a particular state. If you will be registering with the SEC, a Form ADV Part 1A must be prepared including the applicable schedules and filed through the IARD system. Upon filing of the ADV Part 1A, the SEC will review and approve/deny the application/registration. The SEC usually only reviews the ADV Part 1A, however other documents relevant to the application process must be prepared upon approval. These documents include the Form ADV Part2, any client agreements, and code of ethics, compliance documentation, and other regulatory documents. During the regulatory examinations by the SEC these will be reviewed. Applications filed with the SEC are usually reviewed and approved or denied within 45 days of the initial filing.If the application/registration is to be filed with state securities regulators, a Form ADV Part 1A and Part 1B and the applicable schedules must be filed through the IARD system. Additional documents that will need to be prepared and reviewed by the state regulators are Form ADV Part 2, any client agreements; and any other supplemental documents required by the particular state where registration is occurring. When applications are being reviewed by state regulators, it may take 30-45 days and sometimes longer for the approval/denial to take place.Many times upon initial filing, the application is deficient and the state requires additional documentation. Often times, state regulators will require that changes be made to particular client documents and/or request additional requirements which may include information regarding the firm’s background and the services they will be providing. Once this has been thoroughly reviewed, and the regulator(s) is satisfied that all deficiencies and documentation is correct, the firm will be approved.

Whether a firm should be registered with the SEC or within a particular state is typically determined by the amount of assets under management (AUM) that firm has. To be SEC registered, at the time the application is filed or within 120 days of approval, a firm must have over $100 million in AUM. If a firm has less than the $100million required to be registered with the SEC and does not anticipate having that amount (or over) within 120 days of approval, the firm must register with state securities regulators. If the value of the AUM is $100 million or more, a firm must register with the SEC. If a firm registers with the SEC and fails to obtain AUM in the amount of $100 million, that firm must de-register with the SEC and transfer it to the applicable state level. The SEC however has several exemptions and will allow a firm to register with them, having less than $100 million in AUM. Those exemptions include a firm that serves as an investment advisor to a mutual fund or an investment company; is domiciled in Wyoming, is a mid-size advisor in a state that is not subject to state registration,or is required to register in 15 or more states, has to register with the SEC. Additionally, a common exemption is a pension consultant who provides investment advice to plans with at least $200 million in assets.

Often times a firm provides investment advisory services as is defined by the SEC, however it does not mean that the firm has to register as an investment advisor. Some business professions, whose main business activity does not include investment advice, but may “incidentally” provide investment advice, are not required to register with the SEC. Those professions may include lawyers, accountants, bankers, engineers, broker-dealers, teachers, publishers, and advisors limited to U.S. government securities. It is advisable to consult with a compliance professional to make sure these exclusions are accepted and that the activities engaged in do not require registration.

Yes, it is advisable to establish an entity such as a corporation or an LLC prior to submitting your application to be a Registered Investment Advisor (RIA). You will then be able to serve in an individual capacity as an Investment Advisor Representative (IAR). It is important to consult with legal counsel and a tax professional to find out what protection you are offered as an owner of an entity from general liability that does not protect a securities principal from liability under the applicable state and federal securities laws.

The process of setting up your business entity should be started first. Initially, you will need to check for name availability for your business (done through your state corporate name database) to establish a name for your company. Once that is determined, you can begin preparing the required documentation for the RIA application process. However, you may not file the application until your business entity has been established with the state corporations office and an employer identification number (EIN) is obtained from the Internal Revenue Service. When investment advisor applications are submitted and filed via the web IARD/CRD system, a number of states require that corporate documents, i.e. articles of incorporation, articles of organization, be included with the other documents at the time of filing.Prior to obtaining your corporate formation documents, and with an established entity name, you can submit the entitlement documents to initiate access to the IARD/CRD web system by filing the Super Account Administrator (SAA) with FINRA. The FINRA Entitlement Group establishes your individual account identification and a CRD number is appointed to the firm. This will then allow you to file your firm and individual investment advisor registration application via the IARD/CRD system.

As an SEC registered firm you do not have to register with the state securities regulators. An SEC registered firm is required, however, to notice file within each state where it conducts business or if the firm has more than 5 clients with whom it provides investment advice to or engages in a business relationship with. Some states require an SEC firm notice file with applicable state regulators even if there is only one client under the guidance of the firm. Notice filing can be done via the web IARD system by filing the ADV Part 1 and paying the applicable state filing fees.

It is required that an RIA be registered with state regulators in the applicable state it conducts business and/or where the RIA firm has more than 5 clients with whom it provides investment advice to or engages in a business relationship with. Many states require you register in that particular state even if you have only one client. The process for applying for approval has to be completed in its entirety, which is similar to that of the home state where the RIA was established.

A Form ADV has to be completed and filed for the application to be processed for a firm to be approved an RIA. There are two main purposes to the completion of the Form ADV. It has several sections that are required to be complete depending on if a firm is to be filed at the SEC level or the applicable state level. The ADV form has two main purposes. First, it is the official document of your application for investment advisor registration that is reviewed by securities regulators. Second, the information contained therein serves as a disclosure brochure that is to be provided to clients once your RIA is approved and up and running.On the Form ADV an investment advisor must disclose the services that the firm intends to provide, the fee schedule and costs of the aforementioned services, third party associations and fees associated with that solicitation, the background of the principal(s) of the firm, other business activities of the firm’s principal(s) and associates, any conflicts of interest, the code of ethics the firm will abide under, and the policy on proxy-voting. If the RIA will be involved with sponsoring a wrap-fee program, the Form ADV Schedule H (which provides specific information about the program) must be completed. It is required that all sections be completed with true and accurate information.After the ADV has been completed entirely, it can be filed through the web IARD system for the state regulator(s) to review. It should be noted that the SEC only requires that the ADV Part 1A be completed, but state regulators require that the ADV Part 1A and Part 1B be completed as well. The ADV Part 2 and Schedule F is the supplemental narrative document that has to be provided to and approved by securities regulators. It serves as the client brochure which must be given to the client at the time the firm engages in a business relationship with them. This client brochure must be provided to the client on an annual basis. Often times firms provide other separate disclosure materials to clients instead of using the ADV Part 2 and Schedule F.

The ADV Part 2 and Schedule F (client brochure) is to be attached to the ADV when filed electronically via the web IARD system. This allows the state securities regulators the opportunity to review the client brochure at the time of the initial filing.

Note: It is required that you file an annual amendment to the ADV through the IARD system within 90 days of the close of your fiscal year. Also, any material changes (i.e. address, phone number, email, etc.) must be amended on the ADV and filed within 30 days of any changes made.

To draft and prepare the documents associated with registering as an RIA and an IAR it takes approximately one week, providing quick response time from you. Once the application is completed it can be submitted to the SEC or the applicable state for review by securities regulators. It can take up to four weeks for initial review of the application. Depending on the staffing and the volume each state receives, time can significantly differ from state to state. In some cases it can take up to 30 days and sometimes in excess of 45-60 days to get approval. Certain circumstances and/or deficiencies can delay the registration process. These may include, but may not be limited to, any disciplinary history and any past or pending regulatory investigations. This can significantly delay the review/approval process.

The SEC and state registered firms, as well as the IARs associated with the firm are subject to initial and annual state licensing fees. These fees can be viewed on the public IARD system at http://www.iard.com/fees.asp.

Registrations expire each year and therefore have to be renewed annually. The renewal is based on the calendar year and all annual renewal fees are paid via the IARD system. The renewal process generally occurs in early December of each calendar year.The SEC only requires firms to file their ADV Part 1 Annual Amendment and does not charge an initial fee or an annual renewal fee. If the ADV Part 1 Annual Amendment is not filed in a timely fashion, the SEC may withdraw the registration of that particular firm.

Under SEC Rule 206(4)-7, all SEC registered firms require that RIAs have a written compliance program in place, and continually maintain said program. The compliance program should be developed in a written “Compliance Manual” form that outlines the policies to prevent any violations from occurring. Although the SEC does not specifically state what policies and procedures should be included in the written compliance program, certain issues should be covered. These can include, but are not limited to the following issues:

  • Books and Records
  • Safeguarding of Client Information
  • Disaster Recovery Plan
  • Email and other Electronic Communications
  • Code of Ethics
  • Proxy Voting
  • Complaints
  • Soft Dollar Arrangements
  • Trading

Firms that are registered at the state level are more than likely to be subject to these requirements. The level or amount of the net worth/capital or bond requirements is dependent on each individual firm’s procedures and the state in which they are domiciled. If a firm is unable to meet the requirement(s), often times the state(s) will allow a surety bond to be purchased in lieu of the net capital requirement.Not all states have the same requirements. It is best to check with your home state regulators to determine what the state requirements are and if the firm is affected by such requirements.For firms that are SEC registered there are no net worth/capital or bonding requirements. The SEC will, however, look at the financial condition of the firm. It is important that the firm keep complete and accurate financial records. These should be kept as part of the investment advisor’s books and records.

Most states require similar financial records be kept.

When an individual wants to register and serve as an investment advisor representative (“IAR”) of a registered investment advisor firm (“RIA”), most regulators within each state require an individual to take and successfully pass the Series 65 examination. Within each state, security regulators have exceptions to the requirement that IAR candidates successfully pass the Series 65 examination. Most states accept other professional designations (as will be outlined below) and waive the requirement of taking the Series 65 examination.

There are no prerequisites for taking the Series 65. Any individual may sit for this examination.

No, an individual does not have to be affiliated with a firm to open a test window (by filing a Form U10) or to actually take the Series 65 exam. This is different than an individual who wants to take the Series 7 which requires an individual be associated with a firm. When filing the U10 to open the test window, the individual registering for the test should check the area requesting a sponsoring firm as “not applicable”. If an individual is a registered representative with a broker-dealer and wants to open a test window for the Series 65 exam, the individual must go through the broker-dealer’s web CRD account using the U4 form.

If an individual holds and continues to maintain the Certified Financial Planner (CFP), Chartered Financial Analyst (CFA), Personal Financial Specialist (PFS), Charter Financial Consultant (ChFC), or Chartered Investment Counselor (CIC), state securities regulators will waive the Series 65 testing requirement and such individual will be allowed to register as an investment advisor representative. If these certifications and professional designations are not in good standing with the organization certifying the individual, state regulators will require successful completion of the Series 65 exam prior to continuing activities as an IAR. An individual, who is currently in good standing with at least one of the professional certifications outlined above may apply for registration as an IAR. To do this a Form U4 must be filed on behalf of the individual with the appropriate registration fees paid to the designated state.

If an individual has successfully completed the Series 7 and Series 66 examinations and maintained such licenses with a registered broker-dealer, most state regulators will not require successful completion of the Series 65. Some state regulators will require successful completion of the Series 65, if the individual has not maintained a broker-dealer affiliation as a registered representative and securities agent, before being able to continue on with activities as an IAR.

Most state regulators will require an individual to retake the Series 65 exam if two years has lapsed since the individual has been registered as an IAR.

Most state regulators will waive the Series 65 requirement for someone previously registered as an IAR and prior to the state’s adoption of the current rule regarding successful completion of the Series 65. This will only be true if the individual has maintained such registered designation within the state since the adoption of the rule. If the registration has lapsed, state regulators will require the Series 65 examination be successfully completed again by the individual.

State regulators will consider and make certain exceptions, on an individual basis, and grant a waiver from taking the Series 65 exam if an individual has worked within the securities industry in such a capacity that did not require registration or successful completion of the Series 65. Most states require an individual prepare a written waiver request and will require that an individual have substantial work experience (15-20 years) in the industry before consideration is given to waiving the Series 65 requirement. However, it should be noted that there are limited circumstances that will be considered for this waiver/exemption.

Some circumstances, although very limited, may exempt an individual who is acting as a solicitor from successfully completing the Series 65 exam. This exemption relies on the applicable state regulator’s definition of what a solicitor is. The definition can vary from state to state, however, most states model their state laws with the ones outlined in the Uniform Securities Act. Under this Act, the definition includes the solicitor activities within the definition of an IAR, hence, requiring the successful completion of the Series 65. However, each state may define the activities of an IAR differently and not include the solicitor activities. It is the obligation of the solicitor to contact the state regulator for the correct and true requirement of whether the Series 65 exam is needed.

The Series 65 exam (Uniform Investment Adviser Law Examination) is sponsored by the North American Securities Administrators Association (“NASAA”). On behalf of state securities regulators and FINRA, NASAA utilizes Prometric Testing Centers and Pearson Vue Professional Testing Centers across the country. To register for the test a U10 form must be completed. This can be done online through the FINRA website or a hard copy may be completed and forwarded to FINRA at the address obtained when accessing the form from the website. For registering or filing a U10 online, the individual must establish a FINRA account. A series of questions/information will be asked on the form. It needs to be completed as instructed. The individual must indicate that he/she will be taking the Series 65 exam. At the time of submission of the U10 form a payment of $135.00 is due. Upon the U10 form being accepted by FINRA a 120-day window will be opened. If an individual prefers to send a hard copy of the U10 form in the mail, the form can be accessed on the FINRA website. The instructions for completion of the U10 are the same as filing online, however with the hard copy a check in the amount of $135.00 must be included.If an individual does not take the examination within the 120-day window, the window will expire. Another new window then has to be opened and an additional $135.00 fee will need to be paid.If an individual is currently registered with a broker-dealer and wants to sit for the Series 65 exam, he/she must go through the employer webCRD account using the U4 form.No refunds are given, even if you change your mind and do not want to take the examination. The only case in which a refund will be given is if an individual is “grandfathered” into a state and the IARD automatically opens the window when a U4 form is filed to register as an IAR. The regulators within the applicable state must be contacted, who then will contact FINRA to refund the charge.

Study material is not included in the $135.00 filing fee when the U10 form is submitted. It is recommended that an individual obtain study material to prepare for the exam.

Depending on an individual’s efficiency while studying, experience in the securities industry, and one’s knowledge with investment adviser laws, it can be anticipated that as much as 40-60 hours will be needed to prepare for the exam.

One should plan to study at least 4-5 weeks to adequately prepare for the Series 65 examination.To comprehensively and effectively study for the Series 65 exam it is recommended that one obtain well-rated materials which include books, practice tests, DVD’s, and audio recordings. Some individuals prefer to also use an online program to study for the test or some hire a tutor or take a class on the specifics of the Series 65 exam material. Whichever method or materials are used, it is wise to take thorough notes from each section and then take the quizzes for each. Before moving on, make sure that the results of the quiz for each section show that you fully and completely grasp the content of the section. Always review the previous section before moving on to the others.If you have scored well on the practice test (85% or higher) after final review of your study material and while the information is fresh in your mind, you should schedule and take the actual test as soon as possible. Your chances of successfully passing the Series 65 will be better.

The examination covers a vast range of topics relating to the financial industry. Some of those topics may include federal and state securities regulations/laws, methods for evaluating securities, types of security products, ethical guidelines, trading strategies, and the principals of economics.

Most testing centers offer the exam from Monday through Saturday with varying start times. Not all dates are always available; it depends on the testing location. The location of testing sites can be found on the FINRA website.The test is administered on a touch screen computer. When taking the test you cannot immediately go back to a question within the exam once you have moved on to the next question. However, you may check a box to review the question prior to completing the exam. At the point when a question is being reviewed, an individual may change the answer. The exam consists of 130 questions and 180 minutes are allowed for completion. It is not an open book test.

You need one form of government-issued identification (such as a driver’s license) which has your photograph and signature on it. Weapons of any kind are STRICTLY PROHIBITED at any test center. Electronic devices such as cellular phones, pagers, personal laptop computers, hand held computers, or other communication devices are also STRICTLY PROHIBITED. Personal items are required to be left out of the testing room and put in the storage lockers provided at the test center. Some testing centers (however not all) allow the following items in the testing room with some restrictions: tissues, cough drops (unwrapped), sweater, sweatshirt, jacket, blazer, etc. (pockets must be empty), eyeglasses and hearing aids, eye drops, neck/back pillow or other such support pillow (after inspection), jewelry (only analog watches), neck brace (after inspection), insulin pump attached to person’s body, asthma inhaler (with pre-authorization from FINRA), other medical devices (with pre-authorization from FINRA), religious headwear (after inspection), and word to word translation dictionary (ESL) (after inspection). Study materials, notes, and calculators are not allowed. The testing center provides calculators, pencils and scrap paper to use during the test.For those items requiring pre-authorization from FINRA, candidates have to contact FINRA Field Support Services (FSS) at (800) 999-6647 (follow options as instructed.)

Out of the 130 multiple choice questions on the exam, you must answer 94 questions correctly. This is a passing score of 72%. Results for the exam are immediately displayed on the computer screen and can be accessed through the webCRD. State regulators and your RIA have access to your score/results through the webCRD.

A common mistake made is not adequately studying for the test. It is important to have a thorough knowledge of the material covered in the Series 65 exam. Statistics show that when taking a multiple choice exam it is best to go with your first instinct when answering. There is a better chance that you are correct the first time. Be sure to only spend time reviewing the questions that you really do not know the answers to.

If you do not successfully complete the exam you need to wait at least 30 days from the previous test date before you may sit for it again. Even if you fail it a second time you need only wait 30 days to sit again for the third time. It would be after failing to pass the third time that you need to wait up to 180 days (approximately 6 months) before you can take the exam again. Each time you have to retake the exam, a new window has to be opened.Effective September 1, 2011, FINRA implemented a fee for individuals who cancel or reschedule a qualification examination within three to 10 business days of a scheduled appointment date. To avoid cancellation or reschedule fees, candidates wanting to alter a scheduled exam must do so a minimum of 10 business days in advance. If you do not take the exam within the 120-day window, your window expires and is not extended. When, and if, you want to take the exam, a new window will have to be opened, processing it the same as outlined above. For detailed information, please review FINRA’s cancellation/rescheduling policy at http://www.finra.org/Industry/Compliance/Registration/QualificationsExams/RegisteredReps/Qualifications/P120071.

Passing the test is the first step in registering as an IAR. Upon successful completion of the test the registration process can begin. The appropriate paperwork has to be submitted to the state regulators in the state that you will be acting as an IAR. If you will be affiliated with an RIA firm a U4 form must be filed on your behalf (done through the webCRD system). A fee is charged to file and submit the U4, but that varies from state to state. The fee must be paid prior to filing the U4. Also, some states require additional documents be submitted at the time of filing (i.e. fingerprint cards). The appropriate documents, as well as any additional state requirements, will need to be submitted to the applicable state regulator before approval will be granted to act as an IAR.

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