U-4 technical question

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Mar 17, 2011 11:21 am

I intend to leave my firm and start an RIA.  Filling out the ADV and ADVII is done online and a U-4 is also required.  My question is this...Once I fill out the U-4, is my old firm notified automatically?  I'm trying to minimize the amount of time between my resignation and being able to transfer clients to my new firm.  I want to get as much paperwork done as possible before resigning, but I don't want my old firm to find out prematurely.

Cubfan23

Mar 18, 2011 4:25 pm

Be really careful of this, get some legal counsel. You could be "fired for cause" if you get the sequence wrong. You are not allowed to have outside employment, in your contract most likely.

Mar 23, 2011 1:11 pm

Your BD's registration person may possibly receive the email alert of "U4 filing with another firm" however, it is not clear if that alert is sent when you initially file on IARD or when the RIA becomes approved.  For what it's worth, pursuant to a published NASD interpretive letter an RR can apply for FINRA membership (i.e., form his own BD) without giving prior notice to his BD.  The rationale is that the newco BD is not in business and not dealing with the public therefore not an outside business activity warranting disclosure.  I do not make the corollary that applying for RIA status is the same and I agree with BigFirepower that you risk being termed for cause if your BD finds out.  The U5 could read failure to disclose outside business activity and if the U5 has a Yes answer you may have to disclose it on your Form ADV.

Definitely recommend counsel that specializes in BD/RIA registration and one who previously worked on the BD side.  Send me private mail and I can give some referrals though I have no financial interest in doing so.

good luck

Mar 24, 2011 6:42 pm

Thank you both for the helpful insight.  I called the securities division of the Secretary of State and the person who does all of the paperwork for setting up new RIA's told me that the firm can be set up, the ADV and ADV II can be completed without the other firm knowing.  She suggested setting up the firm first, then resigning and requesting a U-5, then filling out the U-4.   To be honest, I'm a little skeptical since anything that is done via IARD is visible to anyone who wants to see it.  I will be meeting with an attorney next week.

Cubfan23

Mar 25, 2011 1:44 pm

When it comes to new formation, submitting to IARD may not be public because the firm is not yet approved.  However, the state's advice appears to be a safe route and if you do something else definitely proceed with either an attorney or a compliance consultant that has experience and expertise in CRD/IARD registration and filings.

good luck