RIA Compliance and Practice Management Blog

New York Announces new Investment Adviser Representative Requirements

Posted by RIA in a Box

Jan 21, 2021 7:21:38 PM

IAR Form U4 Filing Required for SEC and State registered firms in New York StateWith the announced amendments to the New York Investment Advisory Act (the "Rules"), the State of New York has updated requirements for Investment Adviser Representatives (“IARs”). Effective February 1, 2021, the state will require IARs to meet exam requirements and file the Form U4 through the Central Registration Depository (“CRD”) and Investment Adviser Registration Depository  (“IARD”) systems. This blog post will provide an overview of how the state of New York State defines an IAR, how to file and submit the Form U4, and additional nuances to the Rules for firms registered with the Securities and Exchange Commission ("SEC") and for state-registered firms. 

Note: RIA in a Box LLC is not a law firm and does not provide legal advice. We strongly advise that all individuals consult with a securities attorney in matters relating to IAR requirements for the state of New York. This overview is provided for general information purposes only and should not be relied upon to take any action.

The state of New York defers to the definition of individuals acting on behalf of SEC-registered firms to the federal definition of an IAR. Generally, any supervised person of an SEC-registered adviser is one that has a place of business in the state of New York and has more than five natural clients in the state of New York. Additionally, more than ten percent of the person’s clients are natural persons (other than clients who have over $1million in assets under management (“AUM”) or $2.1 million in net worth). A supervised person is generally not considered an IAR if solicitation, meetings, communications, or impersonal investment advice is not regular with clients. The following steps should be taken to properly register: 

  1. Ensure the associated registered investment adviser ("RIA") firm has notice filed with the state of New York through the IARD system.
  2. Submit a Form U4 requesting registration in New York by August 31st, 2021. Pay the required $200 fee through the CRD system.
    It is important to note, if you have not met the exam requirements and do not qualify for a waiver, you must pass the required exams before your application for registration can be approved. If you do not qualify for a waiver because you have been the subject of a regulatory action, arbitration, or other proceeding, you are required to pass an examination. There are special waivers and IAR can seek. Further information can be found in the guidance document provided by the state of New York.

State Investment Adviser Representatives Filing
Under the Rules, the definition of an IAR acting on behalf of a state-registered firm is “a natural person representing an investment adviser or solicitor in doing any of the acts that define an investment adviser”. Generally these acts include engaging in investment advisory business within or from the state of New York. IARs of any investment adviser registered with the state before February 1, 2021 should have already satisfied the pre-existing examination and/or waiver requirements of 13 NYCRR 11. Compliance with examination requirements was documented through a manual process using the form NY-IAQ. Guidance to the requirements for a state IAR are categorized by:

  1. Persons associated with firms registered on IARD before February 1, 2021; and
  2. Persons that become associated with registered firms on or after February 1, 2021 or that become associated with new firms submitting a Form ADV on or after February 1, 2021. Further overviews for each category are as follows:
  1. Persons associated with firms registered on IARD before February 1, 2021:
    1. Persons who previously received an approval or waiver through an NY-IAQ submission
      with your current firm should:
      1. Submit a Form U4 requesting registration in New York by August 31, 2021. Pay the required $200 fee through the CRD system.
      2. Send an email to IPBIAR@ag.ny.gov with your name and CRD number in the header.
        1. If the Department’s records reflect prior approval through the NY-IAQ
          process, your application will be approved through CRD.
        2. If no such prior approval exists, your application will remain deficient. See
          section B.

      B. Persons who did not receive an approval or waiver through an NY-IAQ submission with
           their current firm should:

      1. Submit a Form U4 requesting registration in New York by August 31, 2021. Pay the required $200 fee through the CRD system.
      2. Send an email to IPBIAR@ag.ny.gov with your name and CRD number in the header.
        1. Your email should explain the duties you performed for the investment
          adviser prior to February 1, 2021 and the reason you did not previously
          submit a form NY-IAQ to the Department.
        2. If you were previously denied a waiver by the Department and did not
          subsequently meet the examination requirements in effect at the time of such
          denial, your request for any exam waiver will not be reconsidered.
  1. Persons that become associated with registered firms on or after February 1, 2021 or that
    become associated with new firms submitting a Form ADV on or after February 1, 2021:
    1. Persons who previously received an approval or waiver through an NY-IAQ submission
      with your current firm should:
      1. Submit a Form U4 requesting registration in New York by August 31, 2021. Pay the required $200 fee through the CRD system.
      2. Send an email to IPBIAR@ag.ny.gov with your name and CRD number in the header.

        1. If the Department’s records reflect prior approval through the NY-IAQ
          process, your application will be approved through CRD.
        2. If no such prior approval exists, your application will remain deficient. See section B.

      B. Persons who did not receive an approval or waiver through an NY-IAQ submission with
           their current firm should:

        1. Ensure that the firm you are associated with either is registered as an investment
          adviser in New York or is in the process of registering by submitting a Form ADV
          through IARD.
        2. Submit a Form U4 requesting registration in New York by August 31, 2021. Pay the required $200 fee through the CRD system.
          It is important to note, If you have not met the exam requirements and do not qualify for a waiver, you must pass the required exams before your application for
          registration can be approved. If you do not qualify for a waiver because you
          have been the subject of a regulatory action, arbitration, or other proceeding, you are required to pass an examination. There are special waivers and IAR can seek. Further information can be found in the guidance document.

U4 Image -Filing in the State of New York

When does an IAR in New York need to file the Form U4?
The effective date of the rule is February 1, 2021, although there is an implementation period through August 31, 2021. Additionally, an IAR’s deadline to pass the required exams is December 2, 2021. For any supervised persons hired to a firm after February 1, 2021, they will need to submit a U4 and meet exam requirements prior to conducting work as an IAR.

What are the Exam Requirements?
An IAR must pass the Series 65 OR the Series 7 and Series 66 exams before registration can be approved unless one qualifies for a waiver. Existing supervised persons have up until December 2, 2021 to pass the required exam(s) as long as their U4s were filed/amended by August 31, 2021.

Waivers for Exam Exemption 
There are three types of waivers an IAR can receive in place of exam requirements in the state of New York. The exam exemptions waivers for IARs registering in New York are as follows;

  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 submission of the IAR’s U4 with New York State AND who has no regulatory or civil action, proceeding, or arbitration pending in the proceeding ten years.
  2. An individual who meets the definition of and has acted as an IAR in New York State for the last two years prior to February 1,2021, not eligible for waiver #1, may also be exempt from requirements. Requirements must be met to be eligible for this waiver;
    1. Submission of the Form U4 must be made prior to August 31, 2021
    2. For the prior two years preceding December 2, 2020, the IAR’s activities cannot be limited to serving or acting as a solicitor, or
    3. For two or more continuous years within the last four years, before filing the Form U4, the IAR cannot have ceased performing IAR activities, or
    4. 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 Form 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.
  3.  The exam requirement need not be met for an IAR currently holding one of the following professional designation in good standing;
    • Certified Financial Planner ("CFP")
    • Chartered Financial Consultant ("CFC")
    • Personal Financial Specialist ("PFS")
    • Chartered Financial Analyst ("CFA")
    • Charted Investment Counselor ("CIC")

At RIA in a Box, we provide monthly ongoing RIA compliance support through our MyRIACompliance platform. In addition, we have a dedicated resource page accessible to the public which shares overviews, relevant checklists, and links for an array of topics RIAs can utilize . The resource page will continue to be updated with resources and details as they become available.

Be sure to check back soon as we continue to provide updates on relevant RIA regulatory compliance focus areas.

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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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