Chapter 1: Regulations of Firms and Individuals - D. Regulations of Investment Adviser Representatives

Question 1

Investment Adviser Representative

Answer 1

The investment adviser representative (IAR) definition includes any partner, officer, director, or other individual associated with an investment adviser who does any of the following:

• Manages accounts for clients;
• Makes recommendations or gives advice regarding securities;
• Determines which recommendations or advice should be given concerning securities;
• Solicits, offers, or negotiates the sale of investment advisory services; or
• Supervises employees who perform any of the above functions.

Employees of investment advisers who perform only clerical or administrative duties are excluded from the definition of investment adviser representative.

Question 2

Employment of investment adviser representatives

Answer 2

It is unlawful under the Uniform Securities Act for an investment adviser who is required to be registered to employ any of the following:

• An unregistered investment adviser representative; or
• Anyone who has been suspended or barred by the administrator from association with an investment adviser or broker/dealer.

Question 3

Registration of employment adviser representatives

Answer 3

The Act also requires that individuals who represent investment advisers be registered. Their registration is effective only while they are employed by an investment adviser.

• Form U4 is the Uniform Application for Securities Industry Registration or Transfer. Broker/dealers and investment adviser firms can file Form U4 electronically for their registered representatives and investment adviser representatives. Whenever there is a material change to information that should be disclosed on the Form U4, an amended Form U4 must be filed.
• Form U5 is the Uniform Termination Notice for Securities Industry Registration. Broker/dealers and investment advisers use this form to terminate the registration of an individual in th appropriate jurisdictions and/or self- regulatory organizations.

When an investment adviser representative begins or terminates an association with an investment adviser, the investment adviser must promptly notify the administrator if the adviser is a state-registered adviser. If the investment adviser is a federal covered adviser, only the adviser representative needs to inform the administrator. This differs from the requirements for broker/dealers and agents whereby both are required to notify the administrator.

Question 4

Exemption from registration as an investment adviser representative

Answer 4

An investment adviser representative (IAR) who is employed by an exempt investment adviser is also exempt from registration. However, an investment adviser representative who works for a federal covered adviser may still be required to register in the states where the IAR is working.