On The Docket – Code of Ethics, Form U4, IAR CE Day, and More

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Welcome to the first edition of On The Docket, which is the recently-ascribed name to the Beach Street Legal blog. This inaugural edition is a lot longer than it will typically be in the future, as there was a fair amount of backlogged content and information that has accrued over the last few months.

We’re also slowly but surely converting historical Beach Street Legal blog posts and articles from direct website text to more reader-friendly Google Docs (starting from our most recent posts and articles and working backward in time). Eventually, we’ll also be updating old posts and articles as a result of regulatory updates since the date of first publication (or simply deleting certain posts and articles to the extent regulation has rendered the post or article moot). 


🌐 All past On The Docket editions (as well as other article, video, and podcast content) are available by visiting the On The Docket page of the Beach Street Legal website.

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Happy reading.

– Chris

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Need IAR Continuing Education ethics credits this year? Yours truly will be a speaker at Michael Kitces’ inaugural “IAR CE Day” on August 24th.

Check out Michael’s announcement as well as the IAR CE Day landing page to register. 

Hope to see you there!

All investment advisers are fiduciaries that owe a duty of care and loyalty to their clients.

In an ideal world, that would be the end of the story and the need for investment advisers to maintain a prescriptive code of ethics would be unnecessary. Unfortunately, the early 2000s were plagued by a variety of SEC enforcement actions that alleged fiduciary duty violations – primarily involving trading abuses by investment advisory personnel.

This is why we can’t have nice things.

In response to such widespread abuses, in January 2004, the SEC proposed to require all SEC-registered investment advisers to adopt and enforce a written code of ethics applicable to its supervised persons. The proposal was adopted the same year and became effective as a final rule on August 31, 2004 (with a compliance date of January 7, 2005).

This latest On The Docket article walks through the ins and outs of the SEC’s Code of Ethics Rule with a particular emphasis on the attendant personal securities transactions and holdings reporting obligations of access persons.

Click here to read the article.

If the Form ADV is the most important regulatory filing for a registered investment adviser firm, the Form U4, also known as the Uniform Application for Securities Industry Registration or Transfer, is the most important regulatory filing for its individual investment adviser representatives. Form U4 is a unified form filed electronically through the FINRA Gateway that is used to register representatives of broker-dealers, advisory firms, and issuers of securities.

Yet, at least in my experience, it is also the filing that collects the most dust and is most likely to be out of date in comparison to the other filings required of an advisory firm. FINRA itself (and indirectly the SEC) has also apparently relegated the Form U4 to the rafters of its garage, as neither the Form U4 nor its associated instructions has been materially updated since 2009.

Be that as it may, an individual cannot become registered as an Investment Adviser Representative (IAR) of an advisory firm without Form U4, and all IARs are under an ongoing duty to ensure their respective Form U4s are accurate and up to date. I’m guessing many readers of this article haven’t peeked at their U4 in years, and during that time, may have moved, obtained a new professional designation, started a side hustle, or have maybe even made a compromise with creditors or filed for bankruptcy – all of which are required to be reported on Form U4.

The goal of this On The Docket article is to bring the Form U4 down from the garage rafters, blow the dust off, and flesh out both common missteps and best practices in the process (as applicable to IARs of advisory firms that are not otherwise associated with a broker-dealer or self-regulatory organization, such as FINRA or any registered clearing agency).

Click here to read the article

California is one of the latest states to propose to subject investment adviser reps to annual continuing education requirements, as referenced in this notice of rulemaking action.

State IAR CE adoption can be tracked via this NASAA website (copied below for convenience as of today): 

Arkansas (1/1/2023 effective date)

Colorado (1/1/2024 effective date)

Florida (1/1/2024 effective date)

Kentucky (1/1/2023 effective date)

Maryland (1/1/2022 effective date)

Michigan (1/1/2023 effective date)

Mississippi (1/1/2022 effective date)

Nevada (1/1/2024 effective date)

North Dakota (1/1/2024 effective date)

Oklahoma (1/1/2023 effective date)

Oregon (1/1/2023 effective date)

South Carolina (1/1/2023 effective date)

Tennessee (1/1/2024 effective date)

Vermont (1/1/2022 effective date)

Washington, D.C. (1/1/2023 effective date)

Wisconsin (1/1/2023 effective date)

Remember, IAR CE applies based on the state(s) in which the IAR is registered, and to IARs of both SEC and state-registered RIAs. If you’re not sure where you’re registered as an IAR, look to the state(s) listed under the “License(s)” section of your IAPD profile.

Though published as a Risk Alert, this 7 page PDF is effectively a roadmap for what an RIA should expect to be asked about during its first SEC exam.

Despite the ostensible focus on “Newly-Registered Advisers,” this Risk Alert is equally as valuable for RIAs that have been registered for a while though not yet examined.

If there is one overarching takeaway, it is as follows: Identify, address, and disclose conflicts of interest (e.g., in Form ADV Part 2) so that clients can provide their informed consent to such conflicts.

This is and will always be one of the SEC’s primary areas of interest.