Investment Adviser Representative

Kesterly Materials completed a securities registration in State N that became effective on May 12. No amendment is filed, no stop order is entered, and the underwriter completes the distribution promptly. Under the Uniform Securities Act, the registration statement remains effective until:

1. A.One year from its effective dateCorrect. A securities registration statement under the Act is effective for one year from the date it became effective.
2. B.December 31 of the year in which it became effectiveThis is the annual expiration for persons such as broker-dealers and agents, not for a securities registration.
3. C.Ninety days from its effective dateThere is no ninety-day expiration for an effective securities registration under the Act.
4. D.Indefinitely, unless the Administrator revokes itRegistration statements expire on their own terms. Revocation is a separate remedy, not the only way effectiveness ends.

Why: Under the Uniform Securities Act a securities registration statement is effective for one year from its effective date, so Kesterly's runs until the following May 12. Registration statements for securities are dated from effectiveness; they do not follow the calendar-year cycle that governs the registrations of broker-dealers, agents, investment advisers, and investment adviser representatives.

To register as an investment adviser representative, an individual generally must:

1. A.Own the advisory firmOwnership and registration are separate questions. Most representatives are employees rather than owners, and an owner who never advises clients would not be an IAR at all; what matters is the individual's advisory function and qualification.
2. B.Have 100 million dollars in AUMAsset figures belong to a different question, namely whether the firm registers with the SEC or with the states. They say nothing about an individual's eligibility to act as a representative, which turns on qualification by examination.
3. C.Pass a qualifying exam such as the Series 65 or 66Correct - exam qualification is required.
4. D.Be a CPAProfessional designations are not the gateway to IAR registration, and an accountant is no more automatically qualified than anyone else. Certain credentials may be accepted in lieu of the exam in some states, but the requirement being satisfied is still the qualification standard, not membership in a profession.

Why: An IAR typically must pass a qualifying exam such as the Series 65 or the Series 66 (with Series 7).

Delphine Achebe operates an advisory business by herself as a sole proprietor, with no other employees and no separate corporate entity. She provides advice about securities to about thirty retail clients in the state where her only office is located. Regarding registration, what does the state require of her?

1. A.She must register both as an investment adviser, because the business advises for compensation, and as an investment adviser representative, because she personally gives the advice on its behalf.Correct. A sole proprietor fills both roles, so one individual maintains two separate registrations with different obligations.
2. B.She registers only as an investment adviser representative, since she has no separate firm entity to register.Incorrect. Her advisory business is itself the investment adviser and must be registered, whether or not it is separately incorporated.
3. C.She registers only as an investment adviser, because a person cannot be a representative of herself.Incorrect. The Act treats the firm and the individual providing advice separately, and a sole proprietor must register in both capacities.
4. D.She is excluded from registration entirely, because a sole proprietor with no employees is not in the business of advising others.Incorrect. Advising thirty retail clients for compensation is plainly being in the business; no exclusion applies on these facts.

Why: The Uniform Securities Act draws a clear line between the FIRM and the individuals who act for it. An investment adviser is the person, entity or individual, in the business of advising others about securities for compensation. An investment adviser representative is an individual who, on behalf of an adviser, makes recommendations, manages accounts, determines advice to be given, solicits advisory services or supervises those who do. A sole proprietor occupies both roles simultaneously: her business is the adviser, and she personally is the individual doing the advising for it. The consequence is that she must register in BOTH capacities, so one human being files and maintains two separate registrations. This is not a technicality without consequence. The two registrations carry different obligations, since the firm registration brings the financial requirements, recordkeeping, books and records and any surety bond or net worth obligations, while the individual registration carries the examination or qualifying designation requirement and the individual continuing education obligation.

A person who acts as both an agent and an investment adviser representative must:

1. A.Choose one role onlyNothing in the Act forces a choice between the two roles, and holding both is common in practice. What the Act regulates is function: perform both functions and you carry both registrations.
2. B.Register only onceThis treats registration as something attached to the individual, like a driver's license that covers any vehicle. It attaches to the capacity instead, so selling securities for a broker-dealer and giving advice for an adviser are two separate registrations even for one person.
3. C.Avoid registration entirelyDoing two regulated things cannot add up to no obligation. Each capacity independently triggers a registration requirement, so wearing both hats doubles the filings rather than cancelling them.
4. D.Register in each capacityCorrect - dual registration is required.

Why: Such a person must register in each capacity (as an agent and as an IAR).