Complaints & Enforcement
Investment Adviser Representatives
UPDATED FOR CHANGES EFFECTIVE JANUARY 1, 2009
Changes in the Wisconsin Uniform Securities Law effective January 1, 2009 affect which persons representing state-registered investment advisers or federal covered advisers need to be registered as investment adviser representatives. The new rules accompanying the revised statutes also made significant changes to the exam qualification requirements for investment advisers and investment adviser representatives.
The definition in § 551.102(16), Wis. Stats., states in general that an investment adviser representative is anyone who is a employed by or associated with an investment adviser or a federal covered adviser who makes recommendations or gives advice on securities, manages accounts of clients, holds themselves out as providing investment advice or is compensated for soliciting clients for an investment adviser. This does not include a clerical or ministerial employee.
There is also an exclusion from the definition of investment adviser representative if the supervised person does not have a place of business in Wisconsin and has no more than a specified number of clients. The client de minimis test is based on the number of natural persons a supervised person can have before being required to be registered. The supervised person does not need to be registered if the number of his or her natural person clients does not exceed 5 clients who are natural persons
The administrator may also exclude a person from the definition by rule or order
FOR FEDERAL ADVISERS ONLY: Investment adviser representatives of federal covered advisers who have no place of business in Wisconsin do not need to be registered, regardless of the number of clients.
If you use a solicitor to refer clients to you, that person may also fit the definition of investment adviser representative if the person is a supervised employee of your firm. The solicitor would be required to pass the same examinations as any other investment adviser representative.
A third party solicitor is a person who is neither a partner, officer, director or employee of the adviser nor is a supervised person of the adviser. An example would be an independent contractor who solicits or refers potential clients to a number of different, unaffiliated investment advisers and receives a fee for those referrals. The advisers pay the third party solicitor a fee for each referral but exercise no supervision of the solicitor's activities. The solicitor has the option of arranging with each investment adviser to become registered as an investment adviser representative or becoming a separately registered investment adviser.
§ DFI-Sec 5.13(2), Wis. Adm. Code provides that anyone who complies with rule 206(4)-3 of the Act and who solicits or refers fewer than 10 Wisconsin residents to any one investment adviser within a calendar year is not considered to be “soliciting” for purposes of the definition of “transact business” and the registration requirement.
Generally, the staff considers any person providing advice on a specific client's portfolio, whether directly or indirectly, or who discusses the performance of the portfolio or the investment adviser's recommendations, to be acting in the role of an investment adviser representative. For example, a person who reviews a particular client's account, makes recommendations to another investment adviser but never actually speaks with the client, will still be required to be registered as an investment adviser representative. The advice was specific to that particular client's needs and portfolio and therefore, the adviser is providing advice to a Wisconsin client.
However, the staff has usually determined that a member of an investment committee which makes generic decisions on an investment adviser's recommendations, with no consideration given as to which clients hold or should hold such securities, is not transacting business or providing advice for Wisconsin clients and therefore would not need to be registered as an investment adviser representative.
Every individual seeking to become registered as an investment adviser or an investment adviser representative must pass the examinations prescribed in § DFI-Sec 5.01(3), Wis. Adm. Code. These examinations are the post-January 1, 2000 versions of the NASAA Series 65 Uniform Investment Adviser law Examination or the combination of the post-January 1, 2000 version of the NASAA Series 66 Uniform Combined State Law Examination in conjunction with the Series 7 General Securities Representative examination.
The Series 65 is the full exam covering not only investment adviser regulation topics but also product and economic theory knowledge. The Series 66 exam can only be utilized in conjunction with the Series 7 as an alternative to the Series 65. The Series 66 covers investment adviser regulation topics but does not cover the product knowledge and economic issues as those were already covered in the Series 7 exam. You do not need both a Series 65 and Series 66. You only need one or the other, remembering the Series 66 alone is not sufficient; the Series 66 must always be accompanied by the Series 7.
There are waivers from the examination requirement available if the applicant was registered as a securities agent for a broker-dealer that also conducted investment advisory business under its broker-dealer registration prior to January 1, 2009. Agents who had the exam qualifications required of an investment adviser representative under the pre-2009 securities law and were registered with a broker-dealer/investment adviser on December 31, 2008, have a waiver from the new examination requirements under § DFI-Sec 5.01(4)(f)(2), Wis. Adm. Code However, the Division will utilize the 2 year time limit for such persons to be registered as investment adviser representatives, beginning on December 31, 2008, in order to rely on their qualification under the old law. After December 31, 2010, any agent who has not been registered as an investment adviser representative in Wisconsin will need to take and pass the required examinations.
Beginning January 1, 2009, the combination of the Series 7 and 63 is no longer a basis for a waiver from the Series 65 exam.
Also, anyone who meets any of the criteria set forth in § DFI-Sec 5.01(4)(d), Wis. Adm. Code can claim a waiver if the person holds any of the following designations and is in good standing with the sponsoring organization:
All examinations are administered by FINRA at their computer testing
sites and reservations to take the exams are made by filing Form U-4
if the applicant is currently seeking registration with an investment
adviser or federal covered adviser, or Form U-10 filed directly with
FINRA, along with the appropriate fee. The Division of Securities does
not have forms nor does it have any information or scheduling ability
with regard to these examinations. All inquiries should be directed to
FINRA at 301-590-6500. Study guides for the Series 65 and 66 exams are
available on the NASAA website at www.nasaa.org under Exams or you can
contact NASAA at 10 G Street N.E., Suite 710, Washington, DC 20002 or
call (202) 737-0900. There are a number of private organizations which
offer classroom or self-study courses for the exams. You can find a list
of vendors at : www.nasaa.org/industry___regulatory_resources/exams/887.cfm.
Note that the Division does not endorse or otherwise recommend any vendors.
Applications for registration as an investment adviser representative are accomplished by the investment adviser completing a copy of Form U-4 (PDF: external link) and submitting that application electronically to the Division via the Investment Adviser Registration Depository ("IARD") along with the $80 registration fee. Individuals who will be sole-owner investment advisers do not need to fill out a Form U-4 inasmuch as the Form ADV will constitute the application and that person is not an investment adviser representative for registration purposes.
When the application has been received via the IARD, any applicant who does not have a disciplinary history will automatically be approved. Applicants with disciplinary items on their application will be manually reviewed by the Division. More information regarding the reported disclosure may be requested prior to an approval. Investment adviser representatives must keep their applications current by updating via the IARD whenever the information in the application becomes outdated. Failure to maintain an accurate application may result in action against the investment adviser representative registration.Investment adviser representative registrations expire concurrently with the investment adviser's registration on December 31st. Renewal of investment adviser representative registrations is accomplished as part of the annual renewal sent to investment advisers by the IARD system in November. (See Renewal section). Withdrawals for investment adviser representatives who terminate their employment for any reason must be filed within 30 calendar days of termination. See § DFI-Sec 5.08(2), Wis. Adm. Code.
Broker-dealer Investment Advisers
Broker-dealers who also provide investment advisory services must, after January 1, 2009, have a separate registration or notice filing as an investment adviser. Each person acting as an investment adviser representative must have a separate registration as an RA category on CRD in addition to their agent AG for the broker-dealer. There is a separate $80 filing fee for each investment adviser representative.
The Division has taken the position that agents who were qualified to provide advisory services prior to January 1, 2009 need not pass the Series 65 exam to remain qualified to provide those services for a broker-dealer/investment adviser. However, as noted above, if the person has termed their registration with that broker-dealer/investment adviser, they will have two years to become registered again or they will have to pass the Series 65 or the combination of the Series 7 and 66 exams in order to be qualified for registration.