An Investment Adviser is simply someone who provides advice on securities for compensation. Investment Advisers can render that advice in numerous ways, including:

• Issuing reports or analysis on securities
• Making recommendations to buy or sell securities
• Managing a client’s securities portfolio
• Managing an investment fund that allows for the investment in securities

If you have questions about a particular business model and whether it would be required to license as an Investment Adviser, please review the information on the Division’s website at securities.utah.gov and contact the Division at (801) 530-6600.

Since 1996, the regulation of Investment Advisers has been divided between the U.S. Securities and Exchange Commission (SEC) and the states. With the passage of the Dodd-Frank Wall Street Reform and Consumer Protections Act in 2010, the dividing line between the state-regulated and federally-regulated advisers shifted so that more advisers are regulated by the states.

Currently, Utah regulates those Investment Advisers with less than $100 million in assets under management (AUM). However, federal covered advisers must still notice file in Utah if they are either located in the state or have more than five clients in Utah (note: requirements may vary by state). Also, federal covered advisers must still license any IA Rep with a place of business in Utah or more than five clients in Utah.

The AUM under continuous and regular supervisory management determines whether an Investment Adviser is regulated by the states or the SEC. Investment Advisers file annual updating amendments to their Form ADV and determine, based on the amendment, whether the Adviser needs to switch from state regulation to SEC regulation.

Throughout the licensing process, remember the difference between the advisory firm and individuals who work for that firm. The firm is the entity that licenses as an Investment Adviser. Individuals license as Investment Adviser Representatives (IA Reps).

This distinction helps to understand the different forms that need to be filed to license both the Investment Adviser and any of its Reps (the investment Adviser files a Form ADV for itself and a Form U4 for each IA Rep). Also, this distinction is helpful when filing the Form ADV because some questions ask about “you” with the intention that those questions reference the Investment Adviser itself, not its IA Reps.

Only when a firm is organized as a sole proprietorship would a person be licensed as both as Investment Adviser and an IA Rep (note: most firms are organized as corporations or as limited liability companies).

All fees are paid through the Investment Adviser Registration Depository (IARD) system at IARD.com . Do NOT send any payments to the Division.

Investment Adviser License (new or renewal) $40.00

Investment Adviser Representative License (new or renewal) $30.00

Federal Covered Adviser Notice Filing Fee (new or renewal) $70.00

To apply as an Investment Adviser in Utah, the Investment Adviser and its designated official must complete the following process:

1. FORMATION. Form and register the entity that will become the Investment Adviser. If organizing in Utah, contact the Utah Division of Corporations to register the business. You may also need to register with your local municipality. If organizing outside of Utah or licensing in multiple states, please contact the state’s securities regulator in each state you will conduct business by clicking the link, “Contact Your Regulator” at NASAA.org .
2. IARD ENTITLEMENT. The Investment Adviser will apply, file forms, and make payments online through the Investment Adviser Registration Depository (IARD), an online database mandated by the states and the SEC for electronic filing. FINRA serves as the vendor for the development and operation of the IARD. The Investment Adviser initiates access to the IARD through the entitlement process. To begin the entitlement process, visit the How to Access the IARD web page at IARD.com  or call the IARD Call Center at (240) 386-4848.
   
   During the entitlement process, the Investment Adviser will be assigned a six-digit IARD number used to identify the firm. Once entitled to the IARD, the firm will access FINRA Gateway to file Form U4’s for its IA reps. (Note: all IA Reps are assigned a separate CRD number in the Central Registration Depository (CRD) that stays with the individual throughout their career in the securities industry).
3. FORM ADV. Once entitled to use the IARD system, the Investment Adviser must file FORM ADV through the IARD system. In filing the Form ADV, the Investment Adviser specifies whether it is registering with the SEC or licensing with the state(s). The Form ADV requires the Investment Adviser to provide detailed information about the proposed advisory business to both regulators and advisory clients. For these two audiences, the Form ADV has two parts: Part 1 and Part 2. More information about Part 1 and Part 2 follows in the “Filing Form ADV” section of this guide.
4. FORM U4. Once entitled to the IARD, the firm will also have access to the CRD where it will file Form U4’s for its IA Reps (note: All IA Reps are assigned a separate CRD number that stays with the individual throughout their career in the securities industry).
5. DESIGNATED OFFICIAL (and other IA Reps). Every Investment Adviser must have a designated official. The designated official is a person that is a partner, officer, director, sole proprietor, or a person occupying a similar status or performing similar functions in an investment advisory firm. The designated official must be licensed as an Investment Adviser Representative of the Investment Adviser. The Investment Adviser is responsible for ensuring that all those employed or compensated by the Investment Adviser are properly licensed as an IA Rep (if necessary). See the “Licensing IA Reps” section of this guide for specific licensing requirements.
   
   Licensing IA Reps
   To license the designated official (and other individuals) as an IA Rep, the Investment Adviser must file Form U4 through the FINRA Gateway and the IA Rep must meet the exam requirements.
   
   Form U4 – The Form U4 reports personal information about the individual, such as, employment history and disciplinary records.
   
   Exam Requirements – To be approved as an IA Rep, the individual must have either:
   (a) A valid Series 65 exam; or
   (b) One of the approved professional designations for waiver of the Series 65 exam; or
   (c) Both a valid Series 7 and a valid Series 66 exam.
   
   For more on licensing IA Reps, contact the Division or view the Division’s webpage Investment Adviser Representatives.

6. NOTIFICATION TO THE DIVISION. While the Form ADV is filed electronically through the IARD system, the Investment Adviser must also submit a written notification to the Division that:
   (a) Identifies the designated official for the Investment Adviser,
   (b) States whether the Investment Adviser will have custody of client funds and securities,
   (c) States whether the Investment Adviser will have discretion over client funds and securities,
   (d) Confirms the Adviser has reviewed the definition of Investment Adviser Representative,
   (e) Identifies the number of additional Investment Adviser Representatives the Investment Adviser will be licensing in Utah, if any. For each additional Investment Adviser Representative, list their name and CRD number.
   (f) Demonstrates that the Investment Adviser has met the minimum bonding requirements or minimum net worth requirements. Advisers must meet a minimum of $35,000 for custody and a minimum of $10,000 for discretionary authority. If an Investment Adviser has both custody and discretion, the minimum net worth is $35,000.
   
   For those that bond, submit a Form 4-5BIA (one version for custody; another for discretionary authority). 

   For those that seek to meet the minimum net worth requirement, the Investment Adviser must provide an independent, CPA audited financial statements demonstrating the Investment Adviser has met the minimum net worth requirements  ($35,000 for custody or $10,000 for discretion). Thereafter, on an annual basis, the Investment Adviser must provide independent, CPA audited financial statements demonstrating the Investment Adviser has met the minimum net worth requirements.  The annual financial statements are filed with the Division within 120 days following the end of the Investment Adviser’s fiscal year.
    
   In lieu of the bond, or audited financial statements, the Division may instead accept the Investment Adviser escrow of funds. The funds are required to be held in escrow for three years after the license is expired or terminated. An Investment Adviser that is also registered as a broker-dealer firm, provides proof of membership in the Securities Industry Protection Corporation (SIPC) instead of the bonding or minimum net worth requirements.

7. REVIEW PROCESS. The Division reviews the Form ADV, all additional documentation submitted, and other information about the Investment Adviser, its management, IA Reps, and disclosure history. The goal of this review process is to identify any regulatory concerns at the onset and to address any potential problems or issues the Investment Adviser may have in complying with the Utah Uniform Securities Act and Rules. If the Division identifies any deficiencies or has further questions, it will send a Comment Letter and will require that all concerns be resolved before approving the license. This process may take thirty days or longer to complete.

8. APPROVAL STATUS ON IARD. The Division will notify the Investment Adviser once its license is approved, but will not send any official notification or certificate. The Investment Adviser can always view their licensing status through the IARD system.

9. PUBLIC VIEWING ON IARD. The public can verify the Investment Adviser is licensed through the Investment Adviser Public Disclosure (IAPD) website, hosted by the SEC, at: https://adviserinfo.sec.gov/

   The Investment Adviser should also review the “Annual Requirements” section of this guide for more information.

Form ADV Part 1
Form ADV Part 1 is an online form accessed through the IARD system and can be easily updated at any time by filing an Other-Than-Annual amendment. For that reason, it is best the answers on the initial application or amendment, reflect the firm as it currently exists, unless specifically instructed otherwise. Essentially, consider Form ADV Part 1 as a snapshot of the Adviser at the time of filing through the fiscal year before the filing of the next Annual Amendment. Advisers are required to file ADV amendments annually to update the Adviser’s business or at other times when material changes are made.

Form ADV Part 2
The Form ADV Part 2 is a public disclosure document that must be provided to all advisory clients. A complete Form ADV Part 2 consists of (at least) two separate and self-created brochure: the ADV Part 2A FIRM BROCHURE and the ADV Part 2B BROCHURE SUPPLEMENT for the designated official.

The BROCHURE SUPPLEMENT provides clients with detailed information about owners, management, and/or individual IA Reps of the Investment Adviser, such as: education and business background, disciplinary information, outside business, any conflicts of interest, etc. Depending on the organization of the Investment Adviser, the firm may have multiple BROCHURE SUPPLEMENTS for specific groups of advisory clients. BROCHURE SUPPLEMENTS must be delivered to clients with a FIRM BROCHURE.

All Part 2 documents are to be written in plain English narratives and follow detailed instructions as to their content (See Form ADV Part 2 Instructions). Also, all Part 2 documents need to be text-searchable PDF files and uploaded to the IARD system. Investment Advisers may also need to create an additional Part 2 document if they offer a wrap fee program.

More Information on Form ADV
Forms and filing guidance are available online at IARD.com

To withdraw an application or terminate a Firm license, the Investment Adviser must electronically file Form ADV-W through the IARD system.

To withdraw an application or terminate an Investment Adviser Representative license, the Adviser must electronically file Form U5 through the FINRA Gateway. Timely is within 30 days of the Investment Adviser Representative’s separation from the Firm.

Annual Renewal Fees

All licenses (both Investment Adviser and IA Reps) expire each year on December 31. At the end of October, licensed Investment Advisers receive communication from FINRA regarding the Renewal Program. Renewal Fees are collected in two (2) phases during the Renewal Program – Preliminary Statements and Final Statements.

Preliminary Statements are created the second week of November. The full amount on the Preliminary Statement is due by the second week of December. If the full amount on the Preliminary Statement is not paid before the CRD/IARD shuts down during the last week of December, the Firm and the IA Reps status will expire at 12/31 of each year. Licenses are automatically renewed so long as the Investment Adviser has enough funds in their IARD account to cover the renewal fees on their Preliminary Statement for the Investment Adviser and all of its IA Reps (see the “Licensing Fees” section for fee amounts).

Advisers who pay the full amount shown on the Preliminary Statement will be renewed during the CRD/IARD shut down and a Final Statement will be generated. This statement reconciles changes (additions/deletions) made between the Preliminary Statement and the CRD/IARD shut down. The Final Statement confirms whether firms must pay an additional amount or have paid their renewal fees in full.

Payments due on the Final Statement must be paid before the last week of January to complete the renewal.

For full information on the Renewal Program on the IARD see IARD Renewal Program .

Annual Amendments
Investment Advisers must file an Annual Amendment to the Form ADV (both ADV Part 1 and Part 2). 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. 

Annual ADV Part 2 Amendments

Investment Advisers must file amendments to the FIRM BROCHURE and BROCHURE SUPPLEMENT(s) each year within 90 days from the end of the Investment Adviser’s fiscal year. Investment Adviser must prepare a summary of material changes required by item 2 of Part 2A either in the brochure (cover page or the page immediately thereafter) or as an exhibit to the FIRM BROCHURE. Within 30 days after filing the Investment Adviser’s annual amendments, the Adviser is required to deliver the updated Brochures to clients.

Brochure Delivery Requirements

Investment Adviser must deliver the FIRM BROCHURE and BROCHURE SUPPLEMENT(s):

1. To clients or prospective clients before or at the time the Investment Adviser enters into an investment advisory contract with clients; and,
2. Deliver to each client, annually within 120 days after the end of the Investment Adviser’s fiscal year (without change), either the amended FIRM BROCHURE and BROCHURE SUPPLEMENT(s) or a summary of material changes as required by Item 2 of ADV Part 2A FIRM BROCHURE, with an offer to deliver the full brochures.
   
   Other-Than-Annual Amendments
   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 U4 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 U4. However, the Adviser should undertake an annual review to ensure that the information on the ADV 2B BROCHURE SUPPLEMENT and Form U4 for the IA Reps is accurate and up to date.

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, social media 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)

More Information on Industry Compliance

Division Examinations

Pursuant to §61-1-5 of the Utah Uniform Securities Act, the Division may conduct an examination of any Investment Adviser licensed in Utah. Moreover, failing to comply with a reasonable request from the Division for information or testimony, or an examination request made pursuant to the aforementioned §61-1-5 would be considered a dishonest or unethical business practice under Utah’s R164-6-1g(E)(23).

Common Deficiencies

The most common deficiencies seen during the initial application review process and Division Examinations are:

• Business Description
  The Form ADV requires the Investment Adviser to describe their business, including the services rendered and fees changed. Many deficiencies result from insufficient disclosure of the advisory business.
• Conflicts of Interest
  Failing to disclose conflicts of interest is another common deficiency. R164-6-1g(E)(11) of the Utah Administrative Code (UAC) requires that such disclosures be made.
• Unreasonable Advisory Fees
  Some Investment Advisers seek to charge advisory fees that exceed industry standards which the Division considers unreasonable advisory fees and are prohibited by R164-6-1g(E)(10) of the UAC.
• Outside or Affiliated Business
  All outside of affiliated business of the Investment Adviser or its IA Reps should be disclosed on Form ADV along with any conflicts of interest that business may create.
• Inconsistent Information
  Form ADV Part 1 and Part 2 ask similar questions and the Division often finds that answers given on Part 1 do not match those given on Part 2. Similarly, Form ADV Part 2B BROCHURE SUPPLEMENT and Form U4 do not match for employment histories and outside business activities.

Investment Adviser to Private Funds

If an Investment Adviser will serve as the manager for any type of pooled investment vehicle (e.g. hedge funds), the Division may require additional information about the advisory business and the investment fund before licensing the Investment Adviser.

For any Investment Adviser that will manage an investment fund, the Division requires the following to begin its review process:

1. An explanation of how the securities offering will be made to in investors (see §61-1-7 of the Utah Uniform Securities Act);
2. A copy of the private placement memorandum (or any other disclosure document);
3. A copy of the subscription agreement; and
4. Detailed information about any investors currently invested in the fund (if any).

Visit the Securities Library to view various securities laws and regulations. Investment Advisers may consider reviewing the following documents addressing particular areas of concern:

Division White Papers

Varying/Negotiating Hourly Advisory Fees

Retainer Fee for Advisers

Advisory Fees Based on Net Worth

Legal Definitions

§61-1-13(1) of the Utah Uniform Securities Act defines an Investment Adviser as follows:

(q)

(i) "Investment adviser" means a person who:

(A) for compensation, engages in the business of advising others, either directly or through publications or writings, as to the value of securities or as to the advisability of investing in, purchasing, or selling securities;

or

(B) for compensation and as a part of a regular business, issues or promulgates analyses or reports concerning securities.

(ii) "Investment adviser" includes a financial planner or other person who:

(A) as an integral component of other financially related services, provides the investment advisory services described in Subsection (1)(q)(i) to others as part of a business;

(B) holds the person out as providing the investment advisory services described in Subsection (1)(q)(i) to others; or

(C) holds the person out as a financial adviser, financial consultant, or any other similar title as the division may specify in rule made in accordance with Title 63G, Chapter 3, Utah Administrative Rulemaking Act , in any way as to imply that the person is generally engaged in an investment advisory business, including a person who does not hold a securities license and uses a title described in this Subsection (1)(q)(ii)(C) in any advertising or marketing material.

(iii) "Investment adviser" does not include:

(A) an investment adviser representative;

(B) a depository institution or trust company;

(C) a lawyer, accountant, engineer, or teacher whose performance of these services is solely incidental to the practice of the profession;

(D) a broker-dealer or its agent whose performance of these services is solely incidental to the conduct of its business as a broker-dealer and who receives no special compensation for the services;

(E) a publisher of a bona fide newspaper, news column, newsletter, news magazine, or business or financial publication or service, of general, regular, and paid circulation, whether communicated in hard copy form, or by electronic means, or otherwise, that does not consist of the rendering of advice on the basis of the specific investment situation of each client;

(F) a person who is a federal covered adviser;

(G) a person described in Subsection (3) ; or

(H) such other persons not within the intent of this Subsection (1)(q) as the division may by rule or order designate.

§61-1-13(1) of the Utah Uniform Securities Act defines an Investment Adviser Representative as follows:

(r)

(i) "Investment adviser representative" means a partner, officer, director of, or a person occupying a similar status or performing similar functions, or other individual, except clerical or ministerial personnel, who:

(A)  

(I) is employed by or associated with an investment adviser who is licensed or required to be licensed under this chapter; or

(II) has a place of business located in this state and is employed by or associated with a federal covered adviser; and

(B) does any of the following:

(I) makes a recommendation or otherwise renders advice regarding securities;

(II) manages accounts or portfolios of clients;

(III) determines which recommendation or advice regarding securities should be given;

(IV) solicits, offers, or negotiates for the sale of or sells investment advisory services; or

(V) supervises employees who perform any of the acts described in this Subsection (1)(r)(i)(B) .

(ii) "Investment adviser representative" does not include a person described in Subsection (3) .

Important Securities Laws to Keep Your Investment Adviser Compliant in Utah

Utah Uniform Securities Act :
§61-1-2 Unlawful Acts for Investment Advisers
§61-1-3 Licensing
§61-1-4 Licensing Procedures
§61-1-5 Post-Licensing Provisions
§61-1-13 Definitions
§61-1-16 False Statement Unlawful

Utah Administrative Code (Current Rules)
R164-2-1 Performance-Based Compensation
R164-2-2 Custody; R164-4-3 Licensing
R164-4-4 Minimum Financial Requirements & Reporting
R164-4-5 Bonding Requirements
R164-4-6 Notice Filing; R164-4-7 Internet
R164-4-9 Exemptions; R164-5-1 Record-Keeping
R164-5-3 Financial Reporting
R164-6-1g Dishonest or Unethical Business Practices

Investment Advisers Act of 1940
Sec. 204A Privacy
Sec. 205 Contracts
Sec. 206 Prohibited Transactions
Sec. 215 Hedge Clauses

SEC Rules (Rules to the 1940 Act)
Rule 206(4-2 Custody Rules
Rule 204-2 Books and Records

Contact the Division

The Division is available to answer any licensing questions and assist the Investment Advisers through the licensing process.

Hours of Operation: Monday-Friday 8 am to 5 pm

Main Telephone: (801) 530-6600

Email Address: securities@utah.gov

Website: securities.utah.gov