When starting your firm, it’s important to remember that RIA registration requirements vary by state. In this article, we’ll cover the requirements to register with the state of Pennsylvania.
Who is required to register in the state of Pennsylvania?
Advisors located in Pennsylvania,
Managing less than $100M in AUM (If more than $100M, advisors must register with the SEC),
Serving more than 5 clients in the state,
Or actively marketing their services in PA.
Key Takeaways from this article:
Prevent clerical errors and have peace of mind by hiring a compliance consultant. If that’s not feasible, this article explains the financial statement and document requirements an advisor must provide when registering in Pennsylvania.
Most states require that advisors meet the licensing requirements or designations: Series 65, Series 66 & Series 7 combined, or have CFP, CFA, CIC, CHFC, or PFS designation.
Specifically in Pennsylvania, each investment advisor representative must submit the form U-4 and ADV Part 2B
Financial statement requirements for IRAs in Pennsylvania:
Independent financial advisors managing RIAs with discretion must submit a balance sheet. If operating an RIA with custody, a balance sheet must be submitted along with an income statement.
Required to pass Series 65, Series 66 & 7 combined or have the appropriate designation
This is a requirement across almost all states. These licenses and designations enable financial professionals to become licensed advisors or planners:
Series 66 and 7 combined
Or have CFP, CFA, CIC, ChFC, or PFS designation
Forms & Policies required by Pennsylvania
Registration filing fees are due to the State of Pennsylvania
Filing with Finra
Advisors must first apply to FINRA before completing their RIA application with the state. By applying to FINRA, advisors will receive an account to their WebCRD/IARD online system. As with most states, Pennsylvania also uses FINRA's WebCRD/IARD system to process applications from advisors (RIAs are not regulated or supervised by FINRA).
Form ADV 1 (online portion)
Part 1 of the ADV is the online piece of a firm's registration documentation. It consists of information about the advisor's firm. In this portion, advisors will detail the business and ownership structure, any affiliations related to business practices, clients, and additional information about employees. Essentially, this is where an advisor discloses how the RIA runs their business.
Additionally, part one is used for uploading ADV part 2A and Part 2B.
Form ADV 2A (paper and online)
This is the firm's brochure. It lists the firm's services, fees, disciplinary disclosures, and other details about the firm. The brochure must be given to all clients and prospects. Pennsylvania requires that this form be written in plain English, so clients and prospects can easily understand it.
Form ADV 2B (paper and online)
This is another brochure that's given to the clients. This varies from Form ADV 2A because the advisor will disclose information about themselves. It contains educational history, employment, conflicts of interest, and disciplinary information.
The state requires that any executive officers or anyone giving investment advice to clients must have a Form ADV part 2B.
This is given to clients at the start of their relationship with the advisors, and every year after that. It tells the clients how their information is stored, handled, and disclosed. Each RIA’s policy will be unique to its firm but must meet Pennsylvania’s compliance requirements.
Client Advisory Contract
This contract details the relationship between an advisor and their clients and must meet the regulatory authority standards for client advisory contracts in Pennsylvania state.
Policies and Procedures Manual
This document is to maintain and enforce the firm's internal policies on all aspects of the business. It includes handling client complaints, training new IARs, Business Continuity Plan, Anti-Insider Trading Policy, Anti-Money Laundering Policy, and Information Security Policy.
Code of Ethics
This is exactly what it sounds like. This filing shows the state of Pennsylvania that you are meeting their ethic standards when conducting business.
Starting an RIA in Pennsylvania can be a smooth endeavor with the right resources. If you want to learn more, we invite you to download our comprehensivelaunch kit.
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