Friday, October 4, 2013

Friday Q & A - Independent Registered Representative

I read your article "registration and regulation of investment advisers" and I was wondering how could I go about getting my series 7 and becoming a registered independent rep? Can I get sponsored for the series 7 without actually working for a firm? How do I go about doing this?

You referenced my investment adviser article, ( but asked about an independent registered representative. Those are not the same thing. An independent registered representative works at a brokerage firm that has that business model. To get started with those, brokers typically work in one of the independent offices of an independent broker-dealer, get their license there, and work their way up. There are hundreds of independent broker-dealers. They have different business models, and some are set up to service particular business segments, so you will have to do some research to find a fit for you. One list of independent broker-dealers is available from the Financial Services Institute, an organization of independent broker-dealers.

A Registered Investment Adviser is a different entity. While these entities, and their individual advisers, provide investment advice to individuals and institutions, much like a registered representative,  they cannot charge transaction based compensation – in other words, it can’t accept a commission. RIAs typically get paid a percentage of assets under management.

RIAs are regulated by different entities, and FINRA does not regulate RIAs. In order to become an RIA you will need to register with your home state, and the states where you have, or solicit customers. Different states have different rules as to when you have to register. You will need to file Form ADV, have a compliance manual, customer agreements and other ancillary agreements, and a relationship with a brokerage firm, mutual fund families and insurance companies, depending on the type of business that you intend to operate.

Please keep in mind that the securities laws are complicated, and this is not legal advice. There are a lot of exceptions and variations, and this might not apply to your situation. If you require assistance is starting a firm, or in becoming registered, we have represented nearly 100 financial firms, and can assist you in this endeavor. Email me, or call 212-509-6544.