FINRA SIE Exam & IARs

Beginning on October 1, 2018, the Financial Industry Regulatory Authority (“FINRA”) restructured certain representative-level qualification exams by creating the Securities Industry Essentials (SIE or Essentials) exam and revising appropriate representative-level qualification exams. This change is meant to reduce the duplication across various exams regarding general industry knowledge and was created to allow persons not associated with a firm to show that they have general industry knowledge as they seek jobs in the industry.

Persons seeking their Series 65 license to act as investment advisors (IARs) do not need to take the SIE Exam.

Key facts about the SIE exam include:

• The SIE Exam is open to anyone 18 years old or older and the individual does not have to be associated with a firm;
• The exam is good for four years and, beginning October 1, 2018, is to be used in conjunction with other representative exams;
• If you already hold representative-level exams (i.e., Series 6, 7, 22, 57, etc.) you will be granted credit for the SIE Exam;
• The SIE Exam can be passed once and used in conjunction with taking other affected exams; and
• The table below outlines the affected exam categories:

Registration Category	Requirements as of October 1, 2018
Investment Company Representative	SIE & Series 6
General Securities Representative	SIE & Series 7
DPP Representative	SIE & Series 22
Securities Trader	SIE & Series 57
Investment Banking Representative	SIE & Series 79
Private Securities Offerings Representative	SIE & Series 82
Research Analyst	SIE & Series 7 + 86 + 87
Operations Professional	SIE & Series 99

To review FINRA's published Q&A on the SIE exam, please see: Click Here

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Annual Renewal 2017 - Calendar of Events

As we approach the end of 2016 the preparations for your 2017 Annual Renewal have begun. You may have already received notices directly from the applicable states.

As a client of AdvisorAssist we will manage the annual renewal process. Here are important dates to remember in the coming months.

FINRA, as the administrator of the online regulatory systems, has a full calendar of deadlines at www.finra.org/sites/default/files/crd-renewal-program-calendar.pdf

November 14: Preliminary Statements Issued

FINRA will likely email you a Preliminary Statement that summarizes your firm's current registrations and applicable renewal fees. There is no need to send this to AdvisorAssist. We will proactively obtain and verify the accuracy of these statements. Once validated, we will communicate your funding requirements directly to you.

December 16 (FINAL DEADLINE): Payment of Renewal Fees

To maintain the registration of your firm and investment advisor representatives ("IARs"), you must pay the required fees in full by December 16, 2016. In advance of this deadline, AdvisorAssist will provide step by step instructions on how to process payment of the renewal fees.

January 3: Review your Final Renewal Statement

FINRA will provide a Final Renewal Statement to reconcile any refunds due or additional fees owed. AdvisorAssist will review this reconciliation to ensure accuracy. AdvisorAssist will also recommend additional registrations/notice filings that should be made in calendar year 2017.

Annual Renewals: Common Deficiencies

Here are a list of common deficiencies that we will look to avoid:

• Funding Issues
• Incorrect ADV Content
• Missing Registrations or Notice Filings
• Excessive Registrations or Notice Filings
• Investment Advisor Representative (IAR) Registrations

If you are not an AdvisorAssist Compliance Client and are seeking assistance with the Annual Renewal process, please contact us at: byoung@advisorassist.com

Contributors:
Brian Young

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Protecting Vulnerable Adults from Financial Exploitation

The organization that represents the state securities agencies, North American Securities Administrators Association (NASAA), recently announced that its membership had voted to adopt a model act designed to protect vulnerable adults from financial exploitation.¹ The model act, titled “An Act to Protect Vulnerable Adults from Financial Exploitation”, is now available for states to enact as legislation or implement through regulation. In addition, two new rules have been proposed by FINRA, which are also designed to also help combat financial exploitation of vulnerable adults.² Finally, to bring more attention to this issue, the Consumer Financial Protection Bureau (CFPB) issued a report directed at financial institutions aimed at combating elder financial exploitation.

Protecting Vulnerable Adults in a Nutshell

Vulnerable adults are defined as persons over 65 years of age and those that qualify for protection under a state adult protective services statute. The protections for these individuals impact broker-dealers, investment advisor representatives, and those who serve in a supervisory, compliance, or legal capacity for broker-dealers and investment advisors. Generally, it will mean that as you are dealing with seniors and adults with disabilities, you may have additional responsibilities and a small amount of flexibility from regulators in dealing with certain situations.

Financial Exploitation

The type of financial exploitation that potentially could be stopped is the unauthorized use of the vulnerable adult’s assets, including when a power of attorney, guardianship, or conservatorship is used to make decisions harmful to the client. Both NASAA and the federal agencies have compiled evidence showing that trusted caregivers may obtain control over the vulnerable adult’s assets, then deprive them of the assets or convert the assets by exploiting the services of financial institutions including broker-dealers and investment advisors.³

Possible Changes

State securities regulators, FINRA and the CFPB may begin to incorporate regulatory changes to address this public concern. Advisors that have a reasonable belief that financial exploitation has been attempted or has occurred among their clients may be required to report it to the appropriate regulator and adult protective services agencies. Updates to state and federal rules may also allow advisors to notify any third parties designated by clients of their suspicions of financial exploitation, excepting any third party that are suspected to be the part of the financial exploitation. Finally, state rules may allow advisors to initially delay disbursements from an account of a vulnerable adult for up to 15 business days if, after review, there is suspicion that the disbursement may result in financial exploitation. The advisors may also extend the delay of disbursement for an additional 10 business days at the request of either the state securities regulator or adult protective services.

Crucially, NASAA’s model act grants immunity from administrative or civil liability for advisors when reporting to state regulators and agencies, notifying appropriate third parties, and delaying disbursements based on reasonable suspicions of financial exploitation while acting in good faith. However, the advisor will be required to provide records, including historical records, relevant to the suspected financial exploitation to the state’s adult protective services or law enforcement. As with all things compliance your books and records are very important.

CCO Best Practices

To prepare for dealing with vulnerable adults at your firm AdvisorAssist recommends the best practices of:

• Train staff to prevent, detect, and respond to elder financial abuse by escalating any suspicious activity to the CCO.
• Harness technology such as suspicious activity monitoring technology to identify potential financial abuse.
• Collaborate with stakeholders like custodians, banks, and plan sponsors to identify potentially at-risk clients and trusted third parties acting for the client’s protection
• Document, validate and report suspicious activity to your state regulators or federal agencies.
• Offer clients the ability to have your firm notify a trusted third party when financial exploitation is suspected.
• Maintain awareness of any existing rules or changes at your state securities regulator regarding their adoption of rules regarding vulnerable adults.

^{1. See NASAA Members Adopt Model Act at: Link. ↩}

^{2. See FINRA Regulatory Notice 15-37, October 2015 at: Link. ↩}

^{3. See Testimony of Judith Shaw, NASAA President before the US Senate Special Committee on Aging at: Link. ↩}

AdvisorAssist News for RIAs is a series of articles that will help your firm understand and prepare for changes that may be occurring on the state or federal level. Our goal is to help you increase your confidence that your firm remains in compliance as well as provide some practical steps to help Chief Compliance Officers address this topic.

Contributors:

Brendan Furey
Michael Conlon

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Don't forget about your annual renewal fees!

We have officially entered the annual renewal season for 2016! As we prepare for the holidays, don't forget that you must submit payment for your firm's annual renewal fees. Failure to do so by the stated deadline will result in the termination of your RIA's registration.  You should have already received an email from FINRA in regards to your Preliminary Statement.  Your preparations should be underway now as the deadline for payments is December 18, 2015.  What do you need to do?  


Complete a thorough review of your current registration status.  Here are a few questions to ask yourself:

• Based on your client growth, have you exceeded the de minimus threshold in additional state(s)?  
• Are you currently registered in any states where you are now under the de minimus threshold?
• Are your IARs properly registered?  Key Reminder: For SEC firms, some states do not require IAR registration if there is no place of business or under the de minimus threshold. 
• Once you have confirmed your applicable registrations, make sure to validate the fees calculated by FINRA and transfer funds into your Renewal Account (IARD system). 

If you are not an AdvisorAssist Compliance Client and are seeking assistance with the Annual Renewal process, please contact us at:  sales@advisorassist.com.

For more information, please see the IARD Renewal Program page:  http://www.iard.com/renewals.asp

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RIA Renewal Fees - It is that time again!

As Benjamin Franklin so eloquently stated in 1789, "... in this world nothing can be said to be certain, except death and taxes."
As we roll into the holiday season and prepare for year end, there is yet another certainty. If your fees are not paid in December, you won't be a Registered Investment Advisor in 2015!

FINRA Preliminary Renewal Statements

While FINRA is not your RIA's regulator, they do own the systems that the SEC and the States use to register your firm and its advisory persons. They are also paid to administer the task of collecting your money for the regulators. Starting on November 10, 2014, FINRA will begin emailing designated contacts in your firm with your Preliminary Renewal Statement. This statement identifies what you owe based on where you are registered at the firm and individual levels. All payments must then be made prior to December 12, 2014.

What other steps should my firm take?

1. Review client geography and registration requirements. Are both your RIA firm and your investment advisor representatives properly notice filed and/or registered with each state in which you conduct business (or exempt)? If you exceed the de minimis threshold, you may be required to notice file or register.
2. Review existing registrations. Are you registered in any states where you are under de minimis standards?
3. Review IAR Registrations. Are your IARs properly registered? For SEC firms, some states do not require IAR registration if there is no place of business or under the de minimis threshold.

What happens if I don't pay my fees?

On December 31, 2014, all RIA and IAR registrations expire. If you have not paid and renewed those registrations for 2015, you may be terminated and your right to do business may be revoked. Several states automatically terminate your registration through their participation in the Automatic Fail To Renew Program for 2015. If your RIA firm or its representatives are registered or notice filed in a jurisdiction that participates in the program, your jurisdiction has authorized FINRA to automatically terminate your registrations on December 31, 2014 if all fees are not correct funded in the IARD Renewal Account by the deadline (December 12, 2014).

Next Steps

If you are an AdvisorAssist Compliance Client, we will analyze your account and your Preliminary Renewal Statement to provide guidance on requirements and fees. You may also receive notices from the state(s) and/or FINRA. You may forward those to our attention.

If you are not an AdvisorAssist Compliance Client, we welcome the opportunity to discuss our services. Please contact us at info@advisorassist.com.

Additional information can be found on the FINRA website.

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FINRA Refunds

Hopefully you made it safely through the FINRA renewal process this year.

With new, but still outdated FINRA systems and states in need of funds, we find ourselves at the edge of our seats through the renewal payment season.

Based on the limitations of the FINRA systems, some firms were forced to overpay in November and December. Now it is time to get a refund. FINRA will not automatically refund any overpayments. A formal request to FINRA is required.

Here's how you do this...

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How to Request a Refund from Your Account

Firms may choose to withdraw funds from their Flex-Funding Account due to various circumstances (e.g., renewal refund, or account overfunding). To request a refund from your firm's account, send an email to FINRA Refunds.

Email must be sent from an appropriate firm signatory
Reference the Firm CRD number
Include requested refund amount
Please include the total balance of your firm’s Flex-Funding Account for verification purposes in the email.

Note: The refund check will be made payable to the firm and mailed to the address of record. Most refund requests should be processed within 10 business days of receipt except during the annual renewal season.

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For AdvisorAssist Compliance Clients, we will be contacting you to determine any refunds you would like processed.

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Minnesota IARs - New Registraton Rule Extended

The new Minnesota IAR rule that went into effect on Effective August 1, 2013, will be extended until at least October 31, 2013.

The new Minnesota registration rule requires that all individuals that provide fee-based advice must register as investment advisor representatives ("IARs"). This aligns the Minnesota rule with registration requirements for nearly every other state. The rules will require formal registration as a IAR if you have a place of business in the state or have more than 5 clients. Further, IAR registration will require an annual registration fee paid through the FINRA system.

While the effective date was August 1, 2013, it should come as no surprise that the FINRA managed CRD system is not ready to accommodate this update. Minnesota now estimates that it must extend the effective date to at least the last week in October 2013.

Below is a brief summary of the requirements:

• What is required? If your firm is subject to registration in Minnesota, your IARs will need to be properly registered as well. IARs will be required to pass a Series 65 or 66 exam or have an acceptable exemption (CFA, CFP, ChFC, PFS, or CIC designation in good standing.
• When must one register? The new rule is effective 8/1/13, however the FINRA CRD system is being coded to accept these new requirements for Minnesota. It may take until the end of October for the systems to be updated.
• What action does my firm take? If you have a place of business in Minnesota or have more than 5 clients in Minnesota. We will help you determine the need for particular filings. Existing RIAs will need to amend the U4s for IARs conducting business in Minnesota to pay the state fees.

We will keep you posted on any changes to the timing of this requirement.

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Notice from the Minnesota Department of Commerce - August 6, 2013

During the last legislative session, a bill was passed and signed into law which, among other provisions, requires the registration of Investment Advisor Representatives. This new requirement is consistent with the registration process currently in existence in 47 other states. You can review the legislation on our website at Chapter 106 S--H.F. No. 1243.

The new law has an effective date of August 1, 2013. A number of questions have arisen as a result of this legislation. Investment advisers and their representatives have requested to know whether the Department intends to enforce the testing provision prior to registration, given the short timeframe; whether the Department intends to accept professional designations in lieu of successfully passing an examination; and whether the Department would adopt a waiver or “grandfathering” policy, for Investment Advisor Representatives who have not taken the required tests in recent years and do not have a disciplinary history. The Department has received dozens of comments and has held numerous meetings with interested parties. This update is to advise you of the Department’s current position on these issues and to provide you with updated information.

The registration process will involve using the IARD system. We have now been advised by FINRA that the system will not be ready to accept new Investment Advisor Representative registrations until at least the last week of October, 2013. Therefore, the August 1st date must be extended, as a logistical matter outside the control of the Department and the control of Investment Advisor Representatives. We anticipate that once the IARD system is in place to accept registrations, a reasonable period of time to register will be allowed.

Professional Designations: Acceptance of professional designations, the CFP, CHFC, CFA, PFS and CIC, in lieu of taking a Series 65 examination or both a Series 7 and Series 66 examination is permitted in other states in place of examinations. The Department intends to follow the same approach.

Registrations in Other States: The Department’s current position is that Investment Advisor Representatives who currently are registered in other states and who have passed the required tests will be automatically registered.

New IARs: The Department’s current position is that new Investment Advisor Representatives should be required to take and pass either the Series 65 examination or both the Series 7 and Series 66 examination as a condition of registration.

The question of a deadline for passing the examination and “grandfathering” remains. The Department is currently considering providing “restricted approval” subject to taking and passing the examination(s) within a certain timeframe. We are also considering a waiver in appropriate circumstances. We have not finalized our position on these remaining issues. We would be interested in any further comments you might have in that regard. Please send any comments to the following email address securities.commerce@state.mn.us.

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FINRA proposes to require Brokers to Disclose Bonuses

In FINRA's continued quest for a role in the RIA segment, their 20-member board of governors voted on 12/10/12 to propose a rule that would require a registered representative that switches firms to disclose any compensation, bonus or other incentive received in the recruitment process.

This is important for the fiduciary movement, but is likely to result in continued departures from the brokerage firms. We expect significant pushback from member firms. RIAs must disclose the nature of ANY conflict of interest, including, but not limited to compensation from 3rd parties. However, they do not need to state specific dollar amounts. They are required to state the source and nature of any conflict and how they mitigate such conflict.

Financial Advisor magazine has good coverage on this topic (http://www.fa-mag.com/news/-brokers-must-disclose-bonuses-to-clients-in-finra-proposal-12791.html?section=43)

Opening the door to this disclosure will certainly change the recruitment dynamics and forge a path to disclosure of other perks. We'll continue to keep you apprised on this proposal. Please share any thoughts or questions.

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FINRA off the table for 2012

July 31, 2012

For the moment, FINRA as an Self Regulatory Agency is off the table. H.R. 4624 (the “Investment Adviser Oversight Act of 2012”), which would subject RIA firms to the absurd rule making, inspection and enforcement authority by FINRA, is off the table of this session of Congress.

Not a time for celebrating...

FINRA and its advocates have taken a step back to come up with a better argument and hope the SEC makes no progress on funding, increased exam coverage and credibility. Expect to see this come back in the next session!

As a lesser of two evils, the discussion on RIA Exam Fees is back in circulation. 

On July 25, 2012, Rep. Maxine Waters (D-Calif.) proposed a bill that would would permit the SEC to impose user fees on SEC-registered investment advisors (note SEC only) that will be used solely to enhancing the SEC's examination program.

We see this as a likely reality that more fees are in store for advisors. This will also pave the way for states to implement exam fees.

Sadly, we have yet to see a bill that suggests the SEC actually review its methodology. 

That's politics. We'll keep you apprised of the developments.

February, 2013 Update

Citing a lack of "strong momentum," FINRA has stepped out of the ring and has backed off their efforts to convince Congress that they should oversee registered investment advisors. No doubt they are strategizing on their next move so we will most likely see them resurface at some point. Our view remains that FINRA's long term approach to regulating broker dealers and registered representatives is not a good fit for regulating fiduciaries.

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Hybrid Advisors - FINRA is now Charging for Missed Exams

New release on social media rules. If you are a hybrid advisor, check with both the B-D compliance group and the CCO of your RIA before diving in!


As always, please contact us with any questions on  your particular situation

Here's the FINRA notice...

Regulatory Notice 11-36

Changes to Fees for Cancelling or Rescheduling a Qualification Examination or Regulatory Element Continuing Education Session

Effective Date: September 1, 2011

Executive Summary

FINRA has filed for immediate effectiveness amendments to Section 4 of Schedule A to the FINRA By-Laws to establish a fee for individuals who cancel or reschedule a qualification examination or Regulatory Element Continuing Education (Regulatory Element) session three to 10 business days prior to the appointment date. The changes are effective September 1, 2011.

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