What is an Investment Adviser?
An Investment Adviser is simply someone who provides advice on securities for compensation. However, Investment Advisers can render that advice in numerous ways, including:
To determine whether a particular business would be required to license as an Investment Adviser, please review the Division’s "Do I Need a License?" page or contact the Division at (801) 530-6600.
For more information on Investment Advisers and the licensing process, please review the information below.
FEDERAL vs. STATE REGULATION
Since 1996, the regulation of Investment Advisers has been divided between the Securities and Exchange Commission (SEC) and the states. With the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act in 2010, the dividing line between state-regulated and federally-regulated advisers shifted so that more advisers are regulated by the states.
Under Dodd-Frank, Utah regulates those Investment Advisers with less than $100 million in assets under management and are either located in Utah or have more than five clients in Utah (note: Utah’s definition of “client“ differs from the SEC definition and requirements may vary by state).
Currently, the SEC regulates Investment Advisers with more than $100 million in assets under management. However, federal-covered advisers must still notice file in Utah if they are either located in the state or have more than five clients (note: requirements may vary by state). Also, federal-covered advisers must still license any IA Rep with a place of business in Utah.
The Division sees many different business backgrounds in those who seek to create their own investment advisory firm. Some start their own Investment Adviser after working for another Investment Adviser or a broker-dealer. Others come from non-securities industries, such as real estate or insurance. Some have no professional experience at all. Regardless of the applicant’s experience or business background, the compliance responsibilities are the same.
The securities industry is highly regulated as it can involve the life savings of investors. Consequently, the Investment Adviser license comes with many compliance responsibilities that may be new and intimidating to those who have not encountered them before. Indeed, obtaining a license is a small task compared to the ongoing compliance responsibilities of managing your own advisory firm.
In addition to the Utah Uniform Securities Act and Rules, Utah also incorporates federal requirements from the Investment Advisers Act of 1940. Investment Advisers must also keep up to date on any changes to these laws and regulations that may arise.Some of these compliance responsibilities include, but are not limited to: annual amendments to the Form ADV, maintaining books and records, maintaining minimum financial requirements, bonding requirements, approving advertisements and seminars, and the supervision of IA Reps (note: specific requirements will depend on the specific nature of the investment advisory business and may vary by state).
FILING FORM ADV
Form ADV Part 1
Form ADV Part 2 (new)
Part 2 Requirements
All licenses (both Investment Adviser and IA Rep) expire each year on December 31. Toward the end of each calendar year, licensed Investment Advisers receive communication from FINRA regarding the renewal process. Licenses are automatically renewed so long as the Investment Adviser has enough funds in their IARD account to cover the renewal fees for the Investment Adviser and all of its IA Reps (see the “Licensing Fees” section of this page for fee amounts).
Additionally, investment advisers required to maintain a bond (for discretionary authority and/or custody) must file Form 4-5BIA with the Division. An adviser must also file an audited balance sheet for the firm If the adviser either: (a) charges fees of more than $1,200 and six months in advance, or (b) maintains custody.
Annual Amendments and Other Amendments
Investment Advisers must also file an Annual Amendment to the Form ADV. This is to ensure that the information in the Form ADV remains accurate. The Annual Amendment must be filed each year within 90 days from the end of the Investment Adviser’s fiscal year.
Additionally, the Investment Adviser must make an Other Than Annual Amendment promptly after any material changes to the Investment Adviser occurs. Lastly, while the Form U-4 must also be amended promptly after any material changes or events occur for the IA Rep, no separate annual amendment is required for the Form U-4.
WITHDRAWALS AND TERMINATIONS
To withdraw an application or terminate an Investment Adviser license, the firm must file Form ADV-W through the IARD system.
Investment Adviser Representative