Am I studying for the right exam?

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Aug 28, 2010 11:16 am

I've been studying sporadically for the series 65 and I want to confirm it's the correct exam for my situation.

I currently trade client accounts in a number of states using the de minimis rule (5 or less). I'm thinking of taking on more clients and want to have the proper certification - is the 65 the correct one? (I've seen guys doing 7 + 66)

Thanks.

Aug 28, 2010 11:47 am

So you are currently unlicensed and not affiliated with any broker-dealer and/or RIA? I have to be honest, I thought the de minimis rule applied to state-registered IA's doing business in another state, not to completely unregistered individuals, but I could be wrong. Someone in the know, please post here because I'd like to know if I am.

As for licensing, it all depends on what you want to do. If you are going to be hanging your hat with a broker-dealer, you will want to find one to sponsor you for the 7 and 66. That combination will allow you to do commission and fee business. On the other hand, if you just want to do fee business (by affiliating with or starting your own RIA), you will want to take the 65.

Aug 29, 2010 4:03 pm

ThirdJoker is correct on all counts.  The de minimus rule applies only to an IAR licensed in one state with 5 or fewer clients in another state.  You should be licensed in the state where you live / work out of.

Aug 29, 2010 10:34 pm

Well I actually called Margaret Kurta from the NY attorney general's office (I live in NY) and she said the only event that would require me to register in NY is if I manage money for more than 6 NY residents.

I also called the equivalent offices in the other states and they said the same thing. They seemed to say that I don't need to be registered even in my home state if in a de minimis situation

At any rate I have not yet deposited my clients checks since starting this line of business. And I will not do so until I pass my series 65 and become registered.

Aug 30, 2010 12:08 am

That's interesting.  I guess it depends on the home state and NY appears to be the exception.

Aug 30, 2010 2:12 pm

[quote=ilikecoffee]

Well I actually called Margaret Kurta from the NY attorney general's office (I live in NY) and she said the only event that would require me to register in NY is if I manage money for more than 6 NY residents.

I also called the equivalent offices in the other states and they said the same thing. They seemed to say that I don't need to be registered even in my home state if in a de minimis situation

At any rate I have not yet deposited my clients checks since starting this line of business. And I will not do so until I pass my series 65 and become registered.

[/quote]

I would double or triple check on Margaret's response if I were you. I'm not saying that she is wrong, but I'd be damned sure before I did anything illegal. From a logistical point of view, though, how do you set up accounts and actually manage the money? I think every custodian is going to want to see your RIA paperwork before they will do business with you, no?

Aug 30, 2010 3:34 pm

[quote=ThirdJoker]

[quote=ilikecoffee]

Well I actually called Margaret Kurta from the NY attorney general's office (I live in NY) and she said the only event that would require me to register in NY is if I manage money for more than 6 NY residents.

I also called the equivalent offices in the other states and they said the same thing. They seemed to say that I don't need to be registered even in my home state if in a de minimis situation

At any rate I have not yet deposited my clients checks since starting this line of business. And I will not do so until I pass my series 65 and become registered.

[/quote]

I would double or triple check on Margaret's response if I were you. I'm not saying that she is wrong, but I'd be damned sure before I did anything illegal. From a logistical point of view, though, how do you set up accounts and actually manage the money? I think every custodian is going to want to see your RIA paperwork before they will do business with you, no?[/quote]

Actually I will be talking to a securities lawyer next week to see if it's legit. What I do is I have a group account at Rydex and my clients fax a letter to Rydex asking to be included in my group. Whatever trade I do gets cloned in the client account, sized proportionally for their account size. I've done this at Profunds and Direxion as well. They all allow me to do this with the restriction that I cannot debit fees directly from the client account (direct debit is only allowed for registered managers). I need to send my clients an invoice and they mail me the check.

Aug 30, 2010 4:24 pm

Margaret is wrong.  If you have a place of business in NY and even have one client, you have to register.  It just means that if you have clients in more than one state that are 5 and less (less than six) that you don't have to register with that state (provided you don't have a place of business in that state).

Aug 30, 2010 4:53 pm

So if you have 5 clients each w/ 10m you don't have to register...? Come on... What about one client w/ 25m...? I would talk to your lawyer. Any business office in any state has to be registered, and our industry is more stringent.

Sure I could be wrong, but so could Margeret who may or not understand what you asked and I am guessing you didn't get it in writing...

GL