New York recently adopted new regulations covering registration and examination requirements for investment advisers and their representatives. Notably, these requirements are applicable both to investment adviser representatives (“IARs”) of federally covered advisers and to solicitors operating in New York. The NY State Department of Law released guidance on December 8, 2020 which can be found here.
The thrust of the change for federally covered advisers is the requirement for IARs in New York to meet the State’s examination requirements or obtain a waiver. This will apply to supervisors of persons required to register as well. The requirements themselves are not atypical: FINRA Series 65 examination or a combination of the Series 7 and Series 66 examinations. The most noteworthy element is the inclusion of representatives of federally covered advisers and of solicitors [NYCRR Title 13, Part 11 §11.4-5 for IARs, §11.12 for solicitors].
The rule changes go into effect today, February 1, 2021 but New York has established extended compliance dates of August 31, 2021 for registration and December 2, 2021 for satisfying the examination/waiver requirement. Eligible persons who are IARs or solicitors and who do not intend to continue to operate in New York still must register by August 31, 2021 to continue to operate until the final December 2, 2021 compliance date.
New York does offer waivers for certain credentials maintained in good standing, including the usual : CFP, ChFC, PFS, CFA and CIC. It also offers a special waiver to IARs (i.e., not to solicitors) where the IAR 1) submits the application for registration by the August 31 deadline and applies for the waiver, 2) has been continuously registered to provide investment advice for two years, and 3) and is not, and in the last 10 years has not been, subject to any regulatory or civil action, proceeding or arbitration. Applications for routine waivers can be submitted directly on IARD through the U4 process. Application for the special waiver must be submitted directly to the Department of Law on Form NY-IASW at the time of submission of the Form U4.
The updated regulations do not name “Finders,” specifically, as contemplated in the SEC’s recent proposal: a person who receives compensation to solicit investors on behalf of an issuer. However, the role of Finder is contemplated in New York’s definition of a solicitor: “receives compensation for introducing a prospective investor or investors to an investment adviser or a federally covered investment adviser”. Should Finder become a defined term under Federal statute, we expect that New York will adapt quickly where needed.
If you are operating in New York and need help navigating the new requirements, we are here to help.