RIA Compliance and Practice Management Blog

Can an Investment Adviser "Hang" or "Park" a Series 7 license?

Posted by RIA in a Box

Jul 8, 2014 9:29:00 PM

Canva - Eyeglasses With Black Frame Beside Macbook ProMany financial advisors that are currently affiliated with a wirehouse or an independent broker dealer (IBD) firm that are thinking about starting their own independent registered investment adviser (RIA) firm will often ask if it is possible to "hang" or "park" their series 7 license at another firm? The answer is generally no unless the financial advisor will have a large enough brokerage business to justify a broker dealer firm to allow the advisor to affiliate with it in an active capacity. 

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When there is a large enough brokerage business to justify an investment adviser to be dually registered as a registered representative (RR) of a broker dealer firm while simultaneously operating as investment adviser representative (IAR) of an RIA firm, such an individual will often be referred to as a hybrid advisor. It should also be noted that RIA firms do not hold any licenses for individual investment advisers, regardless of it being the Series 7, Series 65, Series 66, etc. The concept of the Series 7 license being held by a firm is unique to the broker dealer industry.

While there are some exceptions, even the smallest of broker dealer firms will often require an advisor to have at least $100,000 of annual brokerage revenue to consider allowing a hybrid relationship. If that threshold is out of reach for an advisor, unfortunately it is not generally possible to simply "hang" or "park" a Series 7 license with a broker dealer firm. Not only does "parking licenses" not make business sense for the broker-dealer firm, it can also lead to regulatory sanctions against the firm. As such, a financal advisor's Series 7 license will remain active for 24 months after the advisor leaves his or her current broker dealer firm. If the advisor wishes to rejoin a broker dealer after the 24 months have passed, the advisor will need to retake the Series 7 examination.

As RIA registration specialists, we often find that financial advisors are initially quite concerned about losing their Series 7 license, but they quickly come to realize that the advisory fee focus of their business has made the Series 7 license unnecessary and there is often no business reason to try and keep it active for the future.

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Topics: RIA Compliance

RIA in a Box LLC is not a law firm, investment advisory firm, or CPA firm. RIA in a Box LLC does not provide legal advice or opinions to any party or client. You should always consult your relevant regulatory authorities or legal counsel if applicable.

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