New registration and auditing requirements for representatives of New York investment advisor Lowenstein Sandler LLP

What you need to know:

  • Personnel for certain investment advisors and attorneys for clients with individuals in New York must meet the new registration and audit requirements.
  • Affected individuals must be licensed before December 2, 2021 to continue conducting investment advisory businesses in New York State.

Effective February 1, 2021, amendments to the New York Investment Advisory Act (the “Amendments”) require regulated persons representing certain investment advisers registered in New York and, to a lesser extent, investment advisers registered with the Securities and Exchange Commission (” SEC ”) to register with the New York Department of Justice’s Investor Protection Bureau (the“ Department ”) and meet new exam requirements. These regulated persons, referred to as investment advisors’ representatives, have until August 31, 2021 to meet the new requirements and must have their registration approved before December 2, 2021 in order to continue operating in New York. As explained in more detail below, private fund managers who are government registered investment advisers will not be affected by the changes.

I. Who needs to be registered: Personnel of state-registered consultants

The changes primarily affect employees who represent New York Registered Investment Advisers (“NY IARs”). Under New York State law, NY IARs include anyone who represents an investment advisor registered in New York in engaging in any activity that would result in the person being deemed an investment advisor under New York law. Such investment advisers include those (i) who members of the public, either directly or through published material, in or outside of New York State, regarding (a) the value of any securities, or (b) the convenience of investing in, buying, selling or selling securities hold; or (ii) providing analysis or reports relating to securities to members of the public in or out of New York state for compensation and in the ordinary course of business. The NY IARs also include (i) persons who, directly or indirectly, control an investment advisor (“Principals”) registered in New York; and (ii) persons who directly supervise one or more persons associated with a New York registered investment advisor in their capacity as NY IARs (“Regulators”).

II. Who needs to be registered: Personnel of state-registered lawyers

The changes also apply to the staff of certain lawyers (“Lawyers”). Under New York State law, attorneys are individuals who, in the ordinary course of business, provide limited investment advice provided that such individuals receive compensation for introducing a prospective investor or introducing investors to an investment advisor. Lawyers must now register as investment advisers if they (i) are not a SEC registered investment adviser; (ii) are not exempt from the New York Definition of Investment Adviser; and (iii) have six (6) or more customers in New York State (whether individuals or corporations, but excluding financial institutions and institutional buyers). The staff, principals and regulators of attorneys who are required to register are subject to the same registration and auditing requirements as the investment advisors concerned.

III. Exceptions: SEC-registered consultants and exempted reporting consultants

The changes will not affect the staff of many nationwide registered investment advisors. Personnel representing SEC registered investment advisers (“Federal IARs”) are subject to the new registration and auditing requirements only if You are supervised by investment advisers who have clients under Rule 203A-3 of the Investment Advisers Act of 1940, as amended (the “Advisers Act”) (i) more than five (5) individuals. and (ii) have a customer base more than ten percent (10%) of which are natural persons. The Advisors Act does not count “qualified clients” towards this threshold (ie (i) individuals with assets under management of at least USD 1,000,000 with the Investment Adviser immediately after participating in an investment; (ii) individuals with individual or marital net worth of at at least $ 2,100,000 (excluding primary residence); and (iii) qualified buyers or knowledgeable employees (as defined in the Investment Company Act of 1940) Persons who do not regularly refer, meet or communicate with clients of an investment advisor, or who only Providing impersonal investment advice is exempt from the federal IAR definition and if the supervised individuals of an investment advisor registered with the SEC do not meet the above natural client (ie, private fund manager) threshold, staff will not be subject to the changes.

It is of particular importance that the changes largely do not affect the staff of exempted reporting advisors (“exempted reporting advisors”). Such Exempt Reporting Advisers are investment advisers who are either exempt from SEC registration under (i) the exemption of private fund advisers [Section 203(m) of the Advisers Act];; or (ii) the exemption of venture capital advisers [Section 203(l) of the Advisers Act]. Many Exempt Reporting Advisers may be New York registered investment advisors with ongoing government reporting obligations. However, New York law exempts investment advisors from advising fewer than six (6) clients (whether individuals or corporations but excluding financial institutions and institutional buyers) who reside in New York in a twelve (12) month period. These exempt investment advisors include many exempt reporting advisors. Therefore, the new registration and auditing requirements do not apply to Exempt Reporting Advisers employees who are otherwise not required to register with New York State.

IV. Registration process for affected personnel

Affected employees can apply for registration with the department by submitting an online Form U4 to the Central Registration Depository (“CRD”) / Investment Adviser Registration Depository (“IARD”) website along with a registration fee of US $ 200. Individuals who provided investment advice before February 1, 2021 have until August 31, 2021 to submit an application to the CRD / IARD website. The department will only approve applications after an applicant completes a required review before December 2, 2021.

To qualify for the exam, investment advisors must either (i) have passed the Uniform Investment Adviser Law exam (Series 65 exam); or (ii) all three (3) the following exams: (a) the Securities Industry Essentials exam; (b) the General Securities Representative Examination (Series 7 Examination); and (c) the Unified Combined State Legal Exam (Series 66 Exam).

The amendments waive the examination requirements in one (1) of three (3) scenarios:

  1. Pre-registration: Audits are waived if a person (i) has been continuously registered to provide investment advice any jurisdiction for at least two (2) years prior to filing a Form U4 with New York; (ii) has not expired for more than two (2) years; and (iii) was or was not within ten (10) years prior to filing a Form U4, subject to any government or civil action, proceeding or arbitration that would require disclosure on Form U4.
  2. Certification: Exams are waived if a person currently has one of several job titles in good condition Bulleted list available in the changes (e.g. Certified Financial Planner, awarded by the Certified Financial Planner Board of Standards, Inc.).
  3. Special waiver: Audits will be waived if a person, in the ordinary course of business prior to February 1, 2021, provides investment advisory work for at least two (2) years uninterrupted and permissible from a New York office. Individuals must contact the department for this particular NY-IASW Form waiver. This waiver is Not available to persons (i) who submit their applications after August 31, 2021; (ii) whose investment advisory work was limited to attorney practice for two (2) years prior to December 2, 2020; (iii) who in the four (4) years prior to filing a Form U4 has ceased to serve as an investment advisor in the ordinary course of business from a New York office for two (2) or more consecutive years; and (iv) who have been exposed to any regulatory or civil action, proceeding or arbitration in the ten (10) years prior to the filing and which would require disclosure on Form U4.


The changes primarily affect investment advisor representatives who are associated with investment advisers and attorneys and who, under normal circumstances, are required to register with New York State (ie, those with more than six (6) New York clients). The changes will only apply to employees of SEC-registered investment advisors if they are supervised by investment advisors with more than five (5) natural clients or a client base that is more than ten percent (10%) of natural persons. Supervised persons of private fund managers and investment advisors who specialize in institutionally managed accounts are therefore largely unaffected.

The staff of SEC-registered investment advisors may continue to conduct business with and without new auditing requirements to and within New York State as long as their companies do not accept more than five (5) natural New York clients. For some SEC-registered investment advisors who primarily advise private funds and institutions, this may warrant a revision of their compliance policies and procedures if they have previously advised or plan to advise individuals. Exempt Reporting Consultants should closely monitor their customer pools to ensure that they are below the New York State threshold for more than six (6) customers. Because the New York State Investment Advisor definition covers both natural and institutional clients (but not financial institutions and institutional buyers), some exempt reporting staff may be subject to the new registration and auditing requirements at a later date.

Next Steps

The registration deadline for affected representatives of investment advisors is between February 1, 2021 and August 31, 2021. The approval period for existing investment adviser representatives ends on December 2, 2021.

For more information on the changes, see the links below:

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