NASAA Series 63Regulation of Investment Advisers and IARsHard
An investment adviser undergoes a change in legal structure, converting from a partnership to a corporation, with no material change in management or clientele. Under the Uniform Securities Act, the surviving corporation as a successor adviser:
- Amay operate for up to 15 days under the predecessor's registration before ceasing business
- Bmust file a new application for registration reflecting the successor entity
- Cis exempt from registration because no change in beneficial ownership occurred
- Dmay continue operating under the predecessor's registration indefinitely without any further filing
Show answer & explanationAnswer & explanation
Correct answer: B. must file a new application for registration reflecting the successor entity
A change in an adviser's legal structure (e.g., partnership to corporation) creates a new legal entity, or 'successor,' which must file a new registration application even if there is continuity of management and clients.
Why the other options are wrong
- A. There is no such 15-day operational grace period under the USA for successor advisers.
- C. Continuity of ownership does not eliminate the need for a successor registration filing.
- D. The predecessor's registration does not automatically transfer to a new legal entity.
Successor Adviser Registration
When an investment adviser undergoes a change in legal structure creating a new entity, that successor must file a new registration application, regardless of continuity in management or clients.
- Applies to changes such as partnership-to-corporation conversions
- Successor entity is treated as a new registrant
- Continuity of business operations does not exempt the filing requirement
Memory trick: New structure, new paperwork — no shortcuts