When it comes to changing jobs, transferring the licenses you hold to your new firm is typically a seamless task. Indeed, if you have a clean regulatory history, the transfer can typically be done electronically with the push of a button.
Nonetheless, there are still a few things to think about that could catch you unaware—and potentially hold up the transfer of your licenses. Read on to learn about some items to watch out for as you make your move.
Make sure your licenses mesh with the new firm’s business model
Before you move, ask yourself whether you’ll be able to use the particular licenses you hold—and want to keep—in your capacities at the new firm. Say, for example, you have your Series 24, which allows you to manage or supervise representatives. In order to maintain that license, you need to make sure you’ll have similar duties at your new firm. The same is true for other licenses, such as the Series 4, Registered Options Principal, or the Series 7, which allows you to be a registered representative of a broker/dealer.
“Otherwise, if you have a license that’s not being used, it could lapse after two years,” says Daniel G. Viola, a partner with the law firm Sadis & Goldberg LLP in New York.
After that period of time, if you want to use the license again, you might have to take another examination. While the Financial Industry Regulatory Authority (FINRA) may waive the retesting requirement in some cases, it’s not a given, and is certainly more trouble than it’s worth if the situation can easily be avoided.
Also, if you’re joining or starting an RIA and still want to do commission business, you’ll need to affiliate with a broker/dealer because the Securities and Exchange Commission, which has supervisory oversight over RIAs, does not regulate brokerages.
Know the idiosyncrasies of the state or states you do business in
This is particularly important if you are a registered representative and also plan to have your own registered investment advisor. The rules differ from state to state, and a few states like North Carolina don’t allow a person to be licensed with two unaffiliated firms, says Peter A. Savarese, senior regulatory consultant with National Compliance Services Inc. in Delray Beach, Fla.
“Many times, people don’t realize this until it’s too late. They have to change their whole business model,” he says.
Know the rules of the state in which you are registering
Pay attention to this sometimes overlooked detail, especially if you’re seeking to do business in states where you have not worked before. Some states take longer and require more documentation, in order to approve licenses from new applicants.
In Florida, for example, applicants with a criminal history may be required to produce certain documentation in addition to the standard Uniform Application for Broker-Dealer Registration, or U-4. Those documents may include such things as a copy of the police arrest affidavit, arrest report or similar document; a certified copy of the charges; and a certified copy of the plea, judgment and sentence where applicable.
“It catches people off guard because [they are] things you wouldn’t think are relevant,” Savarese says.
What’s more, it can take several months between all the back and forth with the state regulators—thereby holding up the approval process—which is something to avoid if possible. You don’t want to do anything that could jeopardize your relationship with clients or suggest to them that you didn’t prepare properly, according to Savarese.
Make sure the compliance department of your former firm sends you a copy of the U-5
The firm you are leaving has an obligation to send in the Uniform Termination Notice for Securities Industry Registration, or U-5, within 30 days. Make sure you get a copy for your records. Most firms will do that as a matter of course, but if they don’t send it, make sure you ask for it.
“You want a filing to show that it’s clean,” says Richard Roth, a civil litigation and enforcement-defense attorney with the Roth Law Firm in New York. Most times, the form is filled out correctly, but not always.
Getting the copy is particularly important if you leave on bad terms, because in certain instances firms have been known to mark up a broker’s U-5, even though doing so is improper. “I’ve seen some pretty underhanded tactics,” Roth says.
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