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Public Protection Cabinet

Investment Advisers and Representatives

Investment advisers (IAs) are entities that make recommendations regarding the purchase or sale of securities. IAs with no office and no representatives located in Kentucky with five or fewer clients in the state are not required to register or notice file in Kentucky. For more information, read the DeMinimis Rules [PDF 35KB].

Investment Adviser Registration

Applications shall include:

  1. Uniform Form ADV Part I electronically filed through IARD (Investment Adviser Registration Depository). Assistance can be provided at 240-386-4848, which is a Financial Industry Regulatory Authority (FINRA) Gateway number. Additional information can be found at http://www.nasaa.org and  http://www.iard.com/.
  2. Uniform Form ADV Part II filed electronically.
  3. $100 filing fee.
  4. Copy of client advisory contract if based in Kentucky. The contract must contain the following:
       (a) The nature of the advisory services to be provided.
       (b) The time period that the contract remains in effect.
       (c) The advisory fee and the formula for computing the fee.
       (d) The amount of prepaid fee to be returned in the event of contract termination or nonperformance.
       (e) Whether the contract grants discretionary power to the adviser and, if so, the terms of the discretionary power.
       (f) Whether the contract grants custody of customer funds to the adviser and, if so, the terms of the custody.
       (g) That the adviser shall not assign the contract without the prior written consent of the customer.
  5. An investment adviser must be solvent.
  6. If an investment adviser based in Kentucky has custody of client funds or securities, then the adviser shall maintain a minimum net worth of $35,000 or may be bonded up to $25,000 with surety bond and $10,000 net worth.
  7. If an investment adviser based in Kentucky has discretionary authority over client funds or securities, but does not have custody of client funds or securities, then the adviser shall maintain a minimum net worth of $10,000 or be bonded in that amount. For a sample of a surety bond, see the example in the documents list below. 
  8. A current financial statement, if the investment adviser has discretion and/or custody of client funds.
NOTE:  Any Broker-Dealer (BD) that is also an Investment Adviser (IA) or "covered adviser" must either register as an IA under KRS 292.330 or notice file as a "covered adviser" under KRS 292.332. There is no longer a registered BD exemption from the registration or notice filing requirements for investment advisers.
 
Investment Adviser Representative Requirements
 
Applications shall include:
  1. Uniform Form U-4 electronically filed through FINRA's Central Registration Depository (CRD) system.
  2. $50 filing fee paid through CRD.
  3. FBI criminal background check. Note that the criminal background checks take approximately 14 to 16 weeks for the FBI to process.
  4. Applicant Acknowledgement and Authorization for Credit Report form.
  5. Proof of passing Series 65 exam or Series 7 and 66 exams. Enrollment and study materials may be obtained by calling FINRA at 301-590-6500. Qualifying professional designations that may be used in place of the exams are: CFP, ChFC, PFS, CFA and CIC. Please contact DFI for additional waivers or review 808 KAR 10:260.
  6. Dual approval is required if the representative is to be an investment adviser representative for two firms. Refer to 808 KAR 10:030, Section 6.  
NOTE: Effective Jan. 1, 2010, the new passing scores for each securities law exam will be as follows:
 
Test
Raw Score
Percentage of Test Points
Series 65
94
72%
Series 66
75
75%
 
Federally Registered Investment Adviser Notice Filing Requirements 
 
Notice filing requirements include:
1.Uniform Form ADV electronically filed through IARD.
2.$100 filing fee.
Federally Registered Investment Adviser Representative (with a place of business in Kentucky and more than five Kentucky clients)

Applications shall include:
  1. Uniform Form U-4 electronically filed through IARD.
  2. Passage of Series 65 exam or Series 7 and 66 exams or qualifying professional designation. Enrollment and study materials can be obtained by calling FINRA at 301-590-6500.
  3. $50 filing fee. 
NOTE: Any Broker-Dealer (BD) that is also an Investment Adviser (IA) or "covered adviser" must either register as an IA under KRS 292.330 or notice file as a "covered adviser" under KRS 292.332. There is no longer a registered BD exemption from the registration or notice filing requirements for investment advisers.
 
NOTE: Effective Jan. 1, 2010, the new passing scores for each securities law exam will be as follows:
 
Test
Raw Score
Percentage of Test Points
Series 65
94
72%
Series 66
75
75%

 

How to Terminate Registration
 
If an investment adviser wishes to terminate registration with Kentucky, a Form ADV-W must be submitted to DFI or through IARD.
 
To terminate an investment adviser representative registration, submit a Form U-5 to DFI through IARD. 

For More Information

Contact Anthony Murphy at 502-782-9062 with any questions regarding investment adviser registration requirements or compliance issues.

Contact Lindsey Rankin at 502-782-9060 with any questions regarding investment adviser representative requirements. Contact Anna Dennis at 502-782-9061 with any questions regarding investment adviser compliance issues.

Policy Statement 

Please note that an order or advisory opinion may have changed license or registration requirements. Find out more in the Advisory Opinions, Orders and Notices section on DFI's Statutes and Regulations page.
 
Disclaimer
 
The Division of Securities does not respond to requests for written opinions on an “informal” basis such as emails. The Kentucky Securities Act, KRS Chapter 292, sets out a formal process for obtaining written rulings that requires a letter filing (along with a fee of $250) containing all of the relevant facts and circumstances of the proposed transaction(s) so that a thorough consideration of all the issues presented can be made, and to ensure that the provisions of the Act are consistently applied. See KRS 292.420(2)

 

 Securities Documents

 
  
  
Required for
  
  
Applicant Acknowledgement and Authorization for Credit Report.pdfApplicant Acknowledgement and Authorization for Credit ReportInvestment Advisers and Representatives, Issuer Agents7 KB
Criminal Background Check Requirements.pdfCriminal Background Check RequirementsInvestment Advisers and Representatives, Issuer Agents74 KB
Form ADV Glossary.pdfForm ADV GlossaryInvestment Advisers and Representatives161 KB
Notice to State-Registered Investment Advisers About Form ADV Part II.pdfNotice to State-Registered Investment Advisers About Form ADV Part IIInvestment Advisers and Representatives89 KB
Surety Bond for Investment Advisers.pdfSurety Bond for Investment AdvisersInvestment Advisers and Representatives63 KB
 

 Weblinks to Documents

 
  
  
  
Form ADV-Whttp://www.sec.gov/about/forms/secforms.htm
Form U-4 - Uniform Application for Securities Industry Registration or Transferhttp://www.finra.org/Industry/Compliance/Registration/CRD/FilingGuidance/P005235
Form U-5http://www.finra.org/Industry/Compliance/Registration/CRD/FilingGuidance/P005235
Uniform Application for Investment Adviser Registration (Form ADV-Part I and II) through NASAAhttp://www.nasaa.org/Industry___Regulatory_Resources/Uniform_Forms/For more information on submitting Form ADV Part II electronically, read the DFI notice and order
Uniform Application for Investment Adviser Registration (Form ADV-Part I and II) through SEChttp://www.sec.gov/about/forms/secforms.htmFor more information on submitting Form ADV Part II electronically, read the DFI notice and order