Regulatory Filings

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1 Regulatory Filings

Investment Adviser Registrations

The Investment Adviser Registration Depository is an electronic filing system developed for investment advisers and sponsored by the SEC and NASAA, with FINRA presently serving as its operator. The IARD provides the ability to monitor and process investment adviser information via a centralized system. It supports electronic regulatory filing and public disclosures, as well as creates a fee payment and annual renewal processing platform. Most forms can be updated electronically, and firms and IARs are typically registered to conduct business in most states and certain U.S. protectorates through IARD.

Access to the system is made through an entitlement request from FINRA. Additional firm users will be assigned and maintained by the firm’s Super Account Adminstrator (SAA). Due to the sensitivity of the information made available to IARD users, access will be limited and controlled by the CCO.

States that participate in the IARD system typically require fees be made via the firm’s account (E-Bill system) provided through FINRA CRD/IARD. Jurisdictions that do not participate in the use of the IARD for the registration may require fees be sent directly to their securities administrator.

1.1 Form ADV

The IARD allows for the electronic filing of Form ADV as well as the upload, retirement or termination of the firm’s advisory brochure.

Form ADV Part 1A describes the investment adviser’s business operations, entities or persons that own or control the investment adviser, and whether the firm or its APs have been disciplined for violating securities laws, industry regulations, etc. It is completed in electronic format, filed, and amended through the IARD system.

Form ADV Part 1B is a continuance of Part 1A for state investment advisers and contains additional information about a firm relative to their line of business.

Form ADV Part 2A (advisory brochure) or Form ADV Part 2A – Appendix 1 (wrap fee brochure) is a written disclosure statement that provides information about the firm’s business practices, fees charged, adviser conflicts of interest, code of ethics, etc.

Form ADV Part 2B is a written advisory personnel brochure supplement that provides information about the firm’s investment adviser representatives, any reported disciplinary history, their outside business activities, other income they may receive, assigned supervisor, etc.

Should at some point in the future the firm decide to withdraw from being an investment adviser altogether or from certain states, it would file a Form ADV-W.

• Partial Withdrawal is completed if the firm is withdrawing its investment adviser registration with some, but not all, of the jurisdictions where it is registered or has an application for registration pending; or switching from state registration to SEC registration (or vice versa).
  
• Full Withdrawal is completed when the firm is withdrawing from all of the jurisdictions in which it is registered or has an application pending. Even if the firm is going out of business, it must file the ADV-W prior to doing so to notify regulatory authorities.

1.1.1 Form ADV Maintenance

The firm will update its Form ADV Part 1 on an annual basis, and not later than 90 days following its fiscal year end. The CCO or assigned designee will ensure the filing is updated, and a copy is kept on file with the firm’s organizational matters.

Other business or operational changes that occur during the reporting period may require an “Other-Than- Annual” ADV amendment. Changes in ownership/control, addresses, advisory services, etc., typically trigger amendment requirements. The CCO will ensure changes are reported within 30 days of their occurrence.

Form ADV Part 2 and corresponding schedules are filed via the IARD system. The firm will upload its current Form ADV Part 2 when amended and should retire previous versions in succession or as necessary. The firm will annually update its Form ADV Part 2 within the IARD.

1.2 Staff Due Diligence

The CCO or a designee will make a reasonable investigation of all persons applying for registration or association with the firm. Investigations should be conducted by contacting previous employers or third-party review agencies for a reasonable assessment and to determine whether undisclosed disciplinary history exists. A record of these reviews should be noted in the prospective employee’s file. If the prospective employee is transferring from another firm, a copy of their most recent Form U-5 (with amendments when applicable) should be obtained, reviewed, and held on file.

1.2.1 Employee/Associate Background Checks

The firm may obtain an Investigative Consumer Report which may consist of information from public and private sources, public records, former employers, and references. The report may include information concerning driving records, civil and criminal court records, credit, worker’s compensation, education, professional credentials, personal identity, past addresses, social security number, previous employment, and personal references. The review must be conducted in accordance with applicable federal and state laws, including the Fair Credit Reporting Act. It is due to these requirements that the firm will consider engaging screening by a qualified third-party.

In using the mentioned reports for employment or engagement purposes, and before the firm takes any adverse action based in whole or in part on a report, the CCO or designee shall provide a copy of the report to the person to whom the report relates and a description in writing of their rights, as prescribed by Federal Trade Commission regulations.

1.2.2 Registration of Personnel

Most jurisdictions where the IAR will be registered require information concerning their background via Form U-4 and transmitted via the IARD. An IAR’s U-4 filing will include the selection of each jurisdiction that requires agent registration of the IAR (“RA” in the IARD). An IAR cannot begin advisory business until the assigned principal has ensured appropriate registration per jurisdictional statute. The CCO will also ensure that the IAR conducts advisory business only in the states in which registration is maintained or exempted per statute. Effective registration may be noted by the firm’s copy of the individual’s report from the IARD.

1.2.3 Adverse Disclosures

APs should be interviewed by the CCO concerning any investigations or complaints, or “Yes” answers on Form U-4. Any of the latter will require the prospective employee to be cleared by the CCO prior to an offer of employment. The CCO will carefully review each Form U-4 for any disciplinary disclosures of alleged complaints, investigations and any “Yes” answers. The firm will require the submission of a completed DRP and supporting documentation (copies of client’s complaints, arbitration findings, etc.) for all “Yes” answers on the disclosure pages. The CCO will review each entry to ascertain whether the prospective employee presents a potential risk.

1.2.4 Heightened Supervision

APs with a history of adverse disclosures such as complaints, disciplinary actions, arbitrations, etc., may be subject to further supervisory scrutiny or disqualification. Heightened supervisory measures may include:

• Procedures outlining the supervisory arrangements, including an overall analysis, supervisor assigned, as well as the frequency and duration of the review period. This information will be reduced to a written document that will be signed by the CCO, assigned supervisor, and (where appropriate) the AP subject to heightened supervision.

• AP client files and recommendations will be reviewed by the assigned supervisor, and clients may be sampled to verify information.

• Specific training covering topics pertinent to the activities for which the AP was subject to the special supervision may be assigned.

1.2.5 Dual Registration

All requests for dual registration (in applicable jurisdictions) will be in writing, and reviewed and approved (in writing) by the CCO. This requirement involves both investment adviser and broker/dealer activity. Failure to comply with this requirement may result in termination. The CCO will ensure record of the approval.

1.2.6 Fingerprints

The CCO or designee will ensure fingerprint cards are submitted to those jurisdictions where required, such as New Jersey.

1.3 Form U-4 Filings

The filing of Form U-4 is typically done for the purpose of registering an individual with the firm as an IAR in each applicable jurisdiction. Nearly all US jurisdicitons mandate the use of the CRD system for processing Form U-4 filings (including New York as of 2021).

1.3.1 Investment Adviser Representative Registrations

The Series 65 and Series 66 are “criterion based” minimum competency examinations developed by NASAA and administered through FINRA. Candidates who pass one of either exams are considered to have met the minimum competency level. Completion of the exam allows for an applicant to become registered with an investment adviser within two years of the examination date (one year for Arizona residents).

Series 65 Exam: The Uniform Investment Adviser Law Examination is designed to qualify individuals as investment adviser representatives and discusses topics determined necessary in order to provide investment advice to clients.

Series 66 Exam: The Uniform Combined State Law Examination was developed in support of industry requests to design a format to qualify prospective employees as both securities agents and investment adviser representatives. The exam covers topics that have been determined necessary to provide investment advice and effect securities transactions for clients. The FINRA Series 7 is a co-requisite exam and must be successfully completed along with the Series 66 exam typically before an individual may register with a jurisdiction. Candidates may take either exam first but must satisfactorily complete both.

1.3.2 Registration Examination Waiver

As may be allowed by statute, specific professional designations maintained in good standing may preclude an IAR from having to sit for the noted exams, but they do not exempt registration. These may include:

• CERTIFIED FINANCIAL PLANNERTM, CFP®
  
• Chartered Financial Analyst (CFA)
  
• Chartered Financial Consultant (ChFC®)
  
• Chartered Investment Counselor (CIC)
  
• Personal Financial Specialist (PFS)

Certain jurisdictions allow for additional types of waivers due to completion of certain securities industry examinations (e.g., Series 6, 7, etc.) or entry into the industry (“grandfathering”). The CCO will confirm such waivers by jurisdiction. In all instances, the firm (as does the jurisdiction) retains the right to require noted professional designation holders or other previously waivered personnel to successfully complete the earlier stated registration examination. In addition, the firm requires IARs have sufficient investment-related or other similar background and experience. The firm will maintain validation of the required examination(s)/waiver or an individual’s current designation, as applicable. The CCO or designee will ensure that IARs meet the requisite licensing or examination qualification criteria in each appropriate jurisdiction.

1.3.3 Amending Form U-4

As the event occurs, each AP will notify the CCO for potential Form U-4 amendment involving changes in:

• Personal identification information;
  
• AP’s name (e.g., change in marital status, commonly used nickname, etc.);
  
• Residential history;
  
• Business address; or
  
• Outside business activity.

The CCO may amend U-4’s upon receipt of any of the following:

• Client complaint;
  
• Criminal disclosure;
  
• Civil judicial action;
  
• Regulatory matter;
  
• Termination for cause; or
  
• Bankruptcy/Short Sale/Reportable lien.

Each AP will annually attest that the items noted above are current or have not changed. The firm will maintain copies of all amended Form U-4s, with the most current copy being maintained in the AP’s employment file.

1.4 Form U-5 Filings

The Uniform Termination Notice (Form U-5), commonly known as the “U-5,” is used to terminate an individual registration with various self-regulatory organizations and/or jurisdictions. There are essentially three types:

• Full Termination: A full termination U-5 is used when terminating an individual from the firm. All registrations with jurisdictions are terminated. U-5 filings will be promptly filed after the individual has left employment. Disclosure answers are required and residential addresses may be updated.

• Partial Termination: A partial termination U-5 is used to terminate individuals from selected jurisdictions. Disclosure questions are not required and residential addresses may be updated.

• Amended U-5: An amended U-5 is used to update or amend disclosure, or residential information on an individual already terminated from the firm.

1.4.1 Associated Person Termination

Promptly and not later than 30 days of the associated person’s termination, the CCO or designee will ensure the Form
U-5 is filed within the IARD system. Copies of the U-5 will be provided to the IAR, with proof of delivery, and filed within terminated employee records.

1.4.2 Voluntary Termination

All APs will immediately notify the CCO or designee when they decide to voluntarily leave the firm. Regardless of the reason for termination, the CCO or designee must secure all required books and records from the associated person and, to the extent possible, ensure such records are not reproduced or removed from firm’s premises.

1.4.3 Involuntary Termination

When an associated person is terminated due to a violation of policy, unethical business practices, regulation, etc., the CCO must be immediately notified of the specific reason(s) for the termination including any alleged or actual violations. An investigation may likely ensue, not only for client protection and firm risk management purposes, but also in anticipation of potential regulatory or law enforcement response.

Associated persons who are involuntarily terminated may be asked to leave the premises immediately and not permitted to return. Prior to or at the time of termination, the CCO or designee must ensure all books and records of the firm have been returned.

The notification regarding the termination must be objective, therefore, all U-5 entries for terminated for cause cases will be reviewed by the CCO prior to IARD submission to ensure pertinent information is stated. The CCO may also consider consultation with outside parties prior to U-5 submission when appropriate.

Timeliness of Form U-5 filings involving for cause terminations is important and certain violations of law or regulation (i.e., fraud, forgery, etc.) may require firm notification of regulatory and/or law enforcement officials.

1.5 Associated Persons List

Following registration and jurisdictional approval, the CCO or designee will add personnel to the firm’s Associated Persons List” or similar record. This list reflects all personnel, their registration status, IARD number, title(s), basic role(s), assigned supervisor, and office where the AP regularly conducts investment advisory business. This list should be cross-referenced from IARD reports to ensure accuracy of firm data. A historical file will be maintained for a period of five years following each reportable year.

1.6 Employee/Associate Files

A record may be maintained for each associated person including (where applicable):

• Pre-hire background check information;

• Most recent copy of the employee U-4;

• Supporting DRP documentation;

• Copy of the employee’s previous U-5;

• Copy of fingerprint cards;

• Employee attestations;

• Record of the AP’s personal securities accounts;

• Documentation and approval of the AP outside business activities;

• Compensation records and agreements between the AP and firm. If compensation is based on other factors (i.e., shares, etc.) beyond the firm’s standard AP arrangements, a description of the compensation and methodology employed should be noted;

• Relevant IARD status reports;

• Heightened supervision information;

• Disciplinary record; and

• Terminating U-5 and proof of delivery.

1.7 Supervision of Associated Persons

Whether registered or non-registered, all APs will be assigned to a supervisor. The supervisor will have responsibility for oversight of the assigned AP’s business activities. The CCO will ensure that each supervisor will have the necessary experience and qualifications to perform in the role. A record denoting assigned APs and their supervisors for the previous five years will be retained for reference.

1.8 Business Titles

Business titles will be accurate and avoid public misperception as to the associate’s position, education, and professional background. No title will include the term president, vice president, director, portfolio manager, etc., unless it is indicative of the associate’s role and is stated as such in the firm’s records.

1.9 Professional Designations

Only those professional designations that are reflective of an associate’s role or activities with the firm will be used (i.e., AIF®, CFP®, ChFC®, PFS, etc.) on publically-disseminated materials, such as advertising, correspondence, etc. Associates will only use those designations for which they are able to demonstrate they are in good standing via the designation’s accrediting body.

A designation that attempts to imply a specialization to advise senior citizens, elders, retirees, government civilian employees or military personnel is restricted, and will only be approved by the CCO (in writing) upon determination of the type and quality of the designation’s initial and ongoing education program, value to advisory clients, and when approved for use by jurisdictional statute.

1.10 Outside Business Activities

Associates are required to disclose to the firm, in writing, of any outside business activities prior to association with the firm or engaging in such activity following affiliation. On an annual basis, associates will be required to complete a questionnaire disclosing all outside business activities (OBAs). Outside business activities may include a wide range of activities including, but not limited to, the following:

• Using an outside entity for the purposes of office leases, etc.;

• Ownership or employment with an outside entity;

• FINRA or NFA registration;

• Acting as an independent contractor to an outside party;

• Serving as an officer, director, or partner;

• Insider to an issuer of securities;

• Acting as a finder;

• Referring someone and receiving a referral fee;

• Receiving direct or indirect compensation for services rendered outside the scope of association with the firm; or

• Serving as trustee of a trust or general partner of a partnership, limited liability entity, or pool of any kind.

Compensation may include salary, stock options or warrants, referral fees, or providing or discounting of services or products as remuneration. Generally, remuneration consisting of anything of present or future value for services rendered may be considered compensation.

The firm must be made aware of foundation or charitable activities but are generally not filed as an OBA on Form U-4 unless the associate is being compensated or serves in an investment advisory or trustee capacity that the firm believes should be disclosed.

Associates requesting approval for, or notifying the firm of any changes to, an outside business activity must complete the Outside Business Activity disclosure and submit it to the CCO for review. New or amended roles in an OBA must be approved prior to engaging in the activity. Evidence of requests, approvals/disapprovals and annual attestations will be maintained in each associate file.

The firm generally does not disclose outside business activities in Form U-4 or Part 2B of Form ADV if they (i) do not involve or create a material conflict of interest between the firm and its clients, or (ii) do not result in commissions, bonuses, or other compensation as a result of the sale of a security or other investment product, or (iii) do not involve 10% or more time of the associated person, or (iv) do not involve 10% or more income of the associated person.

1.11 Non-Compliance with the Firm’s Code of Ethics

All associates are encouraged to promptly report any violation of the firm’s Code of Ethics or other policy to the CCO (preferably), or the senior-most member of the firm, or its legal counsel, including the discovery of a possible violation committed by another associate. Items that should be reported include but are not limited to non-compliance with state or federal securities laws, conduct that is harmful to clients or the firm, conflicts of interest, etc.

Associates are encouraged to report any violations or apparent violations and such reports will not be negatively viewed, even if the reportable event upon further review is determined to not be a violation and the associate reported such apparent violation in good faith.

Any associate having knowledge of a violation of the firm’s Code of Ethics and allows it to remain unreported may be deemed in violation of the firm’s Code and subject to similar sanction.

While it is believed the firm is capable of addressing violations of its written policies and Code of Ethics, the CCO and any other associate may choose to gain further guidance from the New York Attorney General’s Office.

1.12 Disciplinary Sanctions

Upon discovery of a violation of regulation or firm policies and an investigation, the CCO may impose disciplinary actions as warranted.
Sanctions may encompass various levels including a verbal warning, letter of caution, suspension, fine, disgorgement of fees earned, and/or termination. Certain violations may require making a referral to appropriate regulatory or law enforcement agencies as required by jurisdiction.