Representatives of broker-dealers, investment advisers or issuers of securities must be registered with the appropriate jurisdictions and/or self-regulatory organizations (SROs). Form U4 is used to establish that registration. FINRA, other self-regulatory organizations (SROs) and jurisdictions use Form U5 (Uniform Termination Notice for Securities Industry Registration) to terminate registration and, if relevant, details why an individual left the firm. Show
Optional Form U4 E-Signature and CE Notification Features Available in FINRA GatewayEffective September 25, firms can now enable two new optional features in FINRA Gateway’s Firm Settings. Registered securities professionals with FinPro accounts can now receive auto-generated email reminders about their regulatory element CE requirement as well as electronically sign their Form U4 filings. SEE THE REGISTRATION FILING IN FINRA GATEWAY PAGE FOR MORE INFORMATION On This PageSupport ResourcesGeneral
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Who Files a Form U5?Entitled system users at broker-dealer and investment adviser firms are required to file Forms U5 on behalf of registered representatives and investment adviser representatives. The form must disclose why an individual left the firm and other certain events. Firms are under a continuing obligation to amend and update Section 7 (Disclosure Questions) of Form U5 until final disposition, including reportable matters that occur and become known after initial submission of the form. When Must a Form U5 Be Filed?A Form U5 must be filed when an individual leaves a firm for any reason. A Form U5 must be submitted within 30 days of the individual’s employment end date and generally must be filed electronically. Firms are also required to provide the individual with a copy of their Form U5 within 30 days. A late fee may be applied if the firm does not submit Form U5 within the appropriate timeframe. As stated in FINRA Rule 1010 and the instructions to the Form U5, the filing firm is obligated to retain and make available for inspection upon regulatory request a copy of the initial Form U4 and amendments to Disclosure Reporting Pages. What Kind of U5 Filings Are There?There are three types of U5 filings:
Sample Form U5View PDF What Are an Individual’s Obligations After Registration Has Been Terminated?Individuals continue to be subject to the jurisdiction of the regulators with which they were registered for at least two years after registration is terminated. During that time, individuals may have to provide information about their activities while associated with the firm. Therefore, individuals must report any residential address changes for two years following their termination date or last Form U5 amendment. Individuals should read the Manage Your Career Guide for more information about registration termination. The following information is intended to be a brief overview concerning the investment adviser industry. Topics include definitions, characteristics of an investment adviser, regulators, application process, licensing periods, record keeping requirements, custody of client funds or securities, disclosure requirements, conflicts of interest, and regulator audits. This discussion does not purport to cover all aspects of the industry or all regulator requirements. You are urged to obtain and review the federal or state laws and rules that may apply to your activities.
Investment Adviser and Investment Adviser Representative Registration Three essential elements that characterize an investment adviser are:
Advisers must register or become licensed with either state or federal securities regulators, based on the following: State-registered Investment Advisers:
Federally covered advisers:
Filings
Application for registration/licensing is made by:
A notice filing for a federal covered adviser is usually made by:
The SEC requires electronic filing via the Investment Adviser Registration Depository (IARD). Licensing Period States send out a notice to renew a registration or license some time in advance of the end of the year. Check with each state for specific details. The renewal process for investment advisers will be handled via IARD. Recordkeeping Records generally required of all state-registered investment advisers pursuant to individual state securities statutes and regulations:
Records required of advisers who have custody of client assets:
Records required of advisers that manage client assets:
Custody As part of registration and audit/examination review, state securities regulators will require advisers to show how clients assets are handled by asking the following questions:
Disclosure
The key document in making these disclosures is Part 2A of Form ADV, often referred to as the adviser’s brochure (note that FORM ADV Part 2A replaced FORM ADV Part II in 2011). This document should clearly spell out the details of the advisory relationship and other business interests of the adviser. This is the reference tool with which the client or potential client can compare advisory firms for cost of services and for compatibility with their needs. That is why investment advisory regulations require that Part 2A of Form ADV or the brochure be given to customers in advance or no later than the time of entering into a contract if rescission is permitted within a specifically allotted time. State securities regulators also require FORM ADV Part 2B filings (“the brochure supplement”) from individuals providing advice to customers. Examiners will look for disclosure-related items not only in the disclosure document but in any material describing any facet of the adviser’s business that a client or potential client might see. This can include:
Fiduciary Duty
When examiners review advisory books and records, they will be on the lookout for undisclosed or misrepresented conflicts of interest and prohibited practices. Some are obvious and some not so obvious. Some examples of practices that advisers should avoid are:
The examiner will view perceived conflicts from the point of view of the customer; was the disclosure or lack of disclosure a factor in the client’s decision to use an adviser’s services or ratify an adviser’s recommendations? Was the customer misled? Was the customer placed at a disadvantage or taken unfair advantage of as a result of the conflict and the adviser’s compliance with disclosure requirements? The burden of proof lies with the adviser. Which of the following is included in the definition of a brokerI, II, III, IV. The best answer is C. Under the Uniform Securities Act, a "broker-dealer" is defined as a person that engages in the business of effecting securities transactions for the account of others; or a person that engages in the trading of securities for its own account.
Which of the following are excluded from the definition of a brokerUnder the Uniform Securities Act, agents, issuers, and banks are excluded from the broker-dealer definition. An exclusion is also available to broker-dealers who have no place of business in a state and only deal with institutional investors in that state.
Which of the following is not defined as a broker“Broker-dealer” does not include (1) an agent, (2) an issuer, (3) a bank, savings institution, or trust company, (4) a person who has no place of business in this state if (A) he or she effects transactions in this state exclusively with or through (i) the issuers of the securities involved in the transactions, (ii) ...
Which of the following are permitted to register with the SEC as a federal covered adviser quizlet?Which of the following persons is required to register with the SEC as a federal covered adviser? Investment advisers that act as advisers to investment companies registered under the Investment Company Act of 1940, regardless of their size, are required to register with the SEC.
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