Series 63

Registrations of Persons - Investment Adviser Representative (IAR): Definition

The NASAA Memorandum of Understanding mentioned above addresses the subject of investment adviser representative (IAR) by the following:

If an investment adviser is registered with the SEC, the states may not require registration, licensing, or qualification of the investment adviser or its supervised persons except that states may license, register, or otherwise qualify investment adviser representatives who have a place of business located within that state. Additionally, the states retain the authority to investigate and bring enforcement actions in the case of fraud or deceit, and as otherwise permitted by the NSMIA, by SEC registered investment advisers and their associated persons.


STOP!
If a person meets the above criteria for IAR, he/she MUST register with the state!

Basically, the investment adviser (the firm) may be registered with the state (under the USA) or, the firm may be a "federal covered adviser" and not registered with the state. The IAR is always registered with the state of residence.



Look Out!
If you are having trouble with the term investment adviser representative, think of an IAR in a similar capacity as an agent is to a broker-dealer. An IAR represents an investment adviser.


The term does not include an individual who:

  • Performs only clerical or ministerial acts

  • Is an agent whose performance of investment advice is solely incidental to the individual acting as an agent, and who does not receive special compensation for investment advisery services

  • Is a federal covered investment adviser representative (however, if a federal-covered investment adviser has a place of business in a state where a representative conducts business, the representative may be required to register with the state Administrator.) Do NOT confuse a federal covered investment adviser with an investment adviser required to file on a state level.


Example
If John calls Excellent Money Managers, Inc. to speak with someone about his portfolio and ends up talking to Kathy Kash, is he talking to the investment adviser representative, or the investment adviser?

Answer
John is talking to the investment adviser representative (Kathy Kash), an employee of the investment adviser, Excellent Money Managers, Inc.

Example
Big Bubba Bob is an investment adviser representative of Kamikaze Portfolio Managers, a federal covered investment adviser (meaning it is registered with the SEC); he has clients in California, New York, Colorado and Alaska. The company's offices are located in Georgia. In what states does he have to register with the Administrator(s) to work as an investment adviser representative?

Answer
None, except Georgia if that's where he does business. However, because Kamikaze Portfolio Managers is a federal covered investment adviser (registered with the SEC) he does not have to register in the state where his firm has no physical address.

Investment Advisers: Ongoing Requirements
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