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Holding On to a Series 7 Securities License After Leaving a Broker-Dealer

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We're looking to hire a registered representative of a broker-dealer to work for our registered investment advisory firm as an investment advisor representative. The person has Series 7 and 66 licenses. He'd like to keep his Series 7, just in case things don't work out, but we don't want the hassle of having to clear things with a broker-dealer. It's my understanding that he couldn't just "park" his license with a broker-dealer anyway. How long does the Series 7 remain active once he leaves his broker-dealer?

— S.W., Florida

While there are some firms that may allow a registered representative to "park" his license, you are correct that FINRA frowns on a rep parking his license with a broker-dealer without actively working as a registered representative. A Series 7 registered representative of a broker-dealer has two years from the date he is no longer associated with a broker-dealer to get re-registered with such a firm before his Series 7 license lapses. After that two-year period, if he wants to become associated with a broker-dealer again, he'd have to re-take his series 7 exam. Since he currently has the Series 7 and 66 licenses, he would not need to take another exam (like the 65) in order to become registered as an investment advisor representative (IAR) with a registered investment advisory firm (RIA). As long as he remains continuously registered with an RIA, and does not have a two-year gap where he's not registered as an IAR of an RIA, he could move from one RIA to another without having to re-take any other exams even if more than two years have passed. However, even if he remains continuously registered with an RIA, if he hasn't been registered with a broker-dealer for more than two years, he'd have to retake his Series 7 before he could work as a registered rep.

I own a small RIA firm. Before my quarterly meetings with clients I prepare an Excel spreadsheet summarizing their accounts, which lists the current value and other information. I get the values from the custodian's website, or in the case of fixed annuities, by calling and asking for the value. Its original intent was as a summary for the advisor to refer to during the meeting and not as a handout for clients. I was asked by an advisor yesterday how we can provide a client who holds a fixed annuity with its value during a review, when the client only receives an annual statement from the insurance company. Would it be permissible to give the client the spreadsheet?

— C.G., Georgia

I do not see an issue with providing the spreadsheets to clients, provided the advisor ensures that the values are accurate. You mention that the advisors call and ask for the value with respect to fixed annuities. If you are going to report fixed annuity values to clients, a better practice would be to document in writing the information you receive. In other words, to the extent possible, you should print the values from the insurance company as opposed to relying on a phone call with the company. I would also suggest that if you give the spreadsheet to your clients you should include a disclaimer of some sort stating something to the effect of: "The information being provided was obtained via methods that are believed to be accurate, however, you should always rely on your statements and any inconsistency between this spreadsheet and your statement should favor the statement and be brought to our attention immediately."


Alan J. Foxman is an attorney with the law offices of Rita G. Dew, P.A.
and a senior consultant with National Compliance Services, Inc.
in Delray Beach, Fla. He can be contacted at: 
this email address.

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