NASAA Series 65, Uniform Investment Adviser Law ExaminationLaws, Regulations, and Guidelines, including Prohibition on Unethical Business PracticesMedium
An investment adviser representative (IAR) is leaving Firm A to join Firm B, both of which are registered in the same state. The IAR has several clients who wish to transfer their accounts to Firm B with the IAR. Under the Uniform Securities Act, what is the most appropriate action for the IAR to take regarding client information?
- AThe IAR cannot take any client information from Firm A, as it is considered proprietary to the firm.
- BThe IAR can take client contact information as long as the clients have given verbal consent to transfer.
- CThe IAR may only inform clients of their new affiliation after they have independently contacted Firm B.
- DThe IAR must obtain written consent from each client before taking any non-public personal information.
Show answer & explanationAnswer & explanation
Correct answer: D. The IAR must obtain written consent from each client before taking any non-public personal information.
Under the Uniform Securities Act and typical privacy regulations (like Regulation S-P), an IAR must obtain explicit written consent from clients before transferring their non-public personal information from one firm to another. Verbal consent is generally insufficient.
Why the other options are wrong
- A. While some information might be proprietary, the core issue is the client's right to privacy and control over their non-public information.
- B. Verbal consent is generally insufficient for transferring non-public personal client information.
- C. The IAR can proactively inform clients of their new affiliation, but this must be done in a compliant manner, and transferring client data requires consent.
Client Information Transfer (IAR)
The rules governing how an Investment Adviser Representative can handle client non-public personal information when moving between firms.
- Requires client consent.
- Consent must be written (generally).
- Protects client privacy (Regulation S-P).
- Fiduciary duty applies.
Memory trick: Moving firms? Client data needs written permission, always.