17 December 2020
Main Contributor: Katie Mogan, IACCP® Vice President, Senior Compliance Consultant
Effective February 1, 2021, New York state will require Investment Advisor Representatives (“IARs”) to register with the state via the CRS/IARD system. You can read the updated NY regulation here. Historically, New York has been one of the few states to not require IARs of federally registered investment advisors to register at the state level, due to limitations with technology. Below we will break down the important dates and requirements to help you understand if you need to register your employee(s) in New York.
Who is Considered an IAR?
For a federally registered investment advisor, the term “Investment Adviser Representative” is defined by New York to mean generally any supervised person of an SEC-registered adviser (including any officer, director, or partner) who (i) has more than five (5) natural person clients and (ii) more than ten (10) percent of the person’s clients are natural persons (other than clients have over $1million in assets under management or $2.1 million in net worth – the definition of a qualified client). A supervised person that has a place of business in the state of New York AND has more than five (5) natural clients in the state of New York will need to registrar as an IAR. A supervised person is NOT considered an IAR if they do not regularly solicit, meet, or communicate with clients or provide impersonal investment advice.
How Do I File With New York?
IARs will register with the state of New York with Form U4 through the CRD/IARD system.
When Do I Need to File?
Deep breath. While the effective date of the rule is February 1, 2021 there is a grace period until August 31, 2021 to file any required U4s. If the U4 is submitted/amended by August 31, 2021, the IAR has up until December 2, 2021 to pass the exams required.
For any “new” supervised persons hired after February 1, 2021, a U4 will need to be submitted and exam requirements met, prior to conducting work as an IAR.
What Are the Licensing Requirements?
Every IAR must either satisfy the exam requirements or receive a waiver.
An IAR must obtain the Series 65 OR the Series 7 and Series 66. Existing supervised persons have up until December 2, 2021 to pass the exams, as long as their U4s were filed/amended by August 31, 2021.
There are three types of waivers for IARs registering in the State of New York.
#1: An IAR who has been continuously registered in any jurisdiction without lapse in registration for a period of at least two years prior to the submittal of the IAR’s U4 with the State of New York AND who has no regulatory or civil action, proceeding, or arbitration pending in the proceeding ten (10) years shall be exempt from the above testing requirements.
#2: An individual who meets the definition of and has acted as an IAR within the State of New York for the last two years prior to February 1, 2021, not eligible for waiver #1 noted above, may also be exempt from the exam requirements (upon approval from the State of New York). The following requirements must also be met for this waiver:
i. Submission of the U4 must be made prior to August 31, 2021, or
ii. For the prior two years preceding December 2, 2020, the IAR’s activities cannot be limited to serving or acting as a solicitor, or
iii. For two or more continuous years within the last four years, before the filing the U4, the IAR cannot have ceased performing IAR activities, or
iv. The IAR cannot be subject to any regulatory or civil action, proceeding or arbitration, either pending or in the proceeding ten years from the date of application that would require disclosure on the U4 or that person has been notified or has reason to believe they are currently or remain the subject of a regulatory or law enforcement investigation related to investment related activities.
This is considered a “special waiver” that requires requests to be submitted directly to the State of New York on Form NY-IASW at the time the U4 is submitted.
#3: The examination requirement does not apply to an IAR currently holding one of the following professional designations in good standing:
- Certified Financial Planner (CFP) awarded by the Certified Financial Planner Board of Standards, Inc.
- Chartered Financial Consultant (ChFC) awarded by the American College, Bryn Mawr, Pennsylvania
- Personal Financial Specialist (PFS) awarded by the American Institute of Certified Public Accountants
- Chartered Financial Analyst (CFA) awarded by the Association for Investment Management Research
- Chartered Investment Counselor (CIC) awarded by the Investment Adviser Association; or
- Such other professional designation as the administrator may by rule or order recognize.
What Are the Fees?
Filings fees are $200 per IAR, paid via the CRD/IARD system. However, if you are a sole proprietor who must also register as an IAR, you only need to pay the investment advisor fee and NOT the IAR filing fees UNLESS you are incorporated as an LLC.