Investment Adviser Agent
WHAT IS AN INVESTMENT ADVISER AGENT?
An "investment adviser agent" includes any individual employed, appointed or authorized by an investment adviser 1) to solicit business on a compensated basis for the adviser within or from Connecticut; or 2) who is compensated for rendering advice on securities to clients. A sole proprietor of an investment adviser is not an investment adviser agent. Corporate officers and partners of a partnership may be investment adviser agents if they perform the functions of investment adviser agents. Investment advisers may only employ investment adviser agents in Connecticut if the investment adviser agents are registered under the Connecticut Uniform Securities Act. Investment adviser agent registration may be required even if the investment adviser is SEC-registered (see below).
SPECIAL PROVISIONS APPLY TO INVESTMENT ADVISER AGENTS OF SEC-REGISTERED INVESTMENT ADVISERS
Section 36b-3(12)(B) of the Connecticut Uniform Securities Act provides that individuals employed, appointed or authorized by, associated with or acting on behalf of an SEC-registered investment adviser who are "supervised persons" as defined in Section 202(a)(25) of the federal Investment Advisers Act of 1940 are not "investment adviser agents" under Connecticut law unless they are "investment adviser representatives" as defined in Securities and Exchange Commission Rule 203A-3, 17 CFR 275.203A-3. In addition, Section 203A(b)(1)(A) of the Investment Advisers Act of 1940 requires that the investment adviser representative have a Connecticut place of business for registration to be required.
Section 202(a)(25) of the Investment Advisers Act of 1940 divides "supervised persons" into three classes: 1) partners, officers or directors of an SEC-registered investment adviser; 2) employees of an SEC-registered investment adviser; and 3) other persons who provide investment advice on behalf of the investment adviser and are subject to the investment adviser's supervision and control.
Under SEC Rule 203A-3, an "investment adviser representative":
- Has more than five clients who are natural persons. In deciding whether a client is a "natural person" do not count a) natural persons that, immediately after entering into the contract have at least $750,000 under the management of the investment adviser; b) natural persons whom the investment adviser reasonably believes, immediately before entering into the contract, either have a net worth (together with assets held jointly with a spouse) of more than $1.5 million at the time the contract is executed or are "qualified purchasers" under Section 2(a)(51)(A) of the Investment Company Act of 1940; and c) natural persons who, immediately before entering into the contract are either executive officers, directors, trustees or general partners of the investment adviser or are investment advisory employees (other than employees performing solely clerical, secretarial or administrative functions) who, in connection with their regular functions or duties, have participated in the investment activities of the investment adviser for at least 12 months.
- In addition to having more than five clients who are natural persons, more than 10% of the investment adviser representative's clients must be natural persons for the representative to still be considered an "investment adviser representative" (and subject to Connecticut registration as an investment adviser agent). Here, do not count the sophisticated natural clients described in the preceding paragraph.
- Even if more than 10% of a representative's client base consists of natural persons and the representative services more than 5 natural persons, the representative would not be considered an "investment adviser representative" under federal law (and subject to state registration) if 1) the representative does not, on a regular basis, solicit, meet with or otherwise communicate with advisory clients; or 2) the representative only provides impersonal investment advice.
Federal law defines "impersonal investment advice" to mean "investment advisory services provided by means of written material or oral statements that do not purport to meet the objectives or needs of specific individuals or accounts."
Effective April 1, 2003, all investment adviser agent applicants and registrants must make their filings, including renewals and amendments, electronically through the Investment Adviser Registration Depository ("IARD") administered by FINRA. Please go to www.iard.com for more information.
The fee to register an investment adviser agent is $125. Fee payments are processed through the IARD. Every investment adviser agent registration expires on December 31st of each year unless renewed. The renewal fee is $125 per investment adviser agent and is processed through the IARD.
REGISTRATION FORM (FORM U-4)
At least one investment adviser agent application (on Form U-4) must be filed via the IARD if the investment adviser is a corporation, partnership or limited liability company.
PHOTOGRAPH NO LONGER REQUIRED
Section 36b-11 of the Connecticut Uniform Securities Act requires that each registration application include a photograph "unless the commissioner waives the requirement of such photograph." Given the widespread use of fingerprint processing through FINRA's Central Registration Depository ("CRD"), the Commissioner has determined that a photograph is no longer required.
Investment Adviser Agent and Broker-dealer Agent (or Agent of Issuer)
Multiple registration is permissible where 1) the investment adviser agent obtains prior written consent from his or her employers to act in the multiple capacity; and 2) the employers' written consent is filed with the department. Employer consent letters must have original signatures, be dated and signed by an officer, partner or other authorized person of similar rank. Exception: No consent is needed where the employers are affiliated or under common management or control.
Investment Adviser Agent of More than One State-Regulated Investment Adviser
An individual may be registered as an investment adviser agent with multiple investment advisers after receiving the department's written consent. The department may consent if the investment adviser agent procures from each employing investment adviser, and files with the department, a written, dated undertaking stating that the employer: 1) consents to the multiple employment and setting forth the effective date of the multiple employment; and 2) agrees to assume joint and several liability with all other employers for any act or omission of the investment adviser agent during the employment period.
The undertaking may omit the joint and several liability component where the investment advisers are affiliated or under common management and control.
Unless "grandfathered" or eligible for a waiver, each investment adviser agent applicant must pass the Uniform Investment Adviser Law Examination (Series 65) or the Series 66 exam. The following designations will qualify an investment adviser agent applicant for an examination waiver: 1) The Chartered Investment Counselor (CIC) designation conferred by the Investment Adviser Association (formerly known as the Investment Counsel Association of America or ICAA); 2) the Chartered Financial Analyst (CFA) designation conferred by the Association for Investment Management and Research; 3) the Certified Financial Planner (CFP) designation conferred by the Certified Financial Planner Board of Standards, Inc.; 4) the Personal Financial Specialist (PFS) designation conferred by the American Institute of Certified Public Accountants; and 5) the Chartered Financial Consultant (ChFC) and Chartered Life Underwriter (CLU) designations awarded by the American College, Bryn Mawr, Pennsylvania where the designation holder is subject to, and in compliance with, continuing education requirements prescribed by the American College and the Society of Financial Service Professionals.
INVESTMENT ADVISER AGENTS WHO LEAVE THE FIRM (FORM U-5)
If an investment adviser agent leaves your advisory firm's employ, you must file written notice electronically with the IARD on Form U-5 within 30 days after the investment adviser agent's departure. The notice should state why the investment adviser agent's employment ceased. If you do not timely file a Form U-5, your investment advisory firm may be billed a renewal fee for the investment adviser agent. If the investment adviser agent is transferring from another registered investment adviser, there is a $100 transfer fee. The fee for a mass transfer of investment adviser agents from one firm to another is $75 per investment adviser agent.