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- 22 September, 2008 -
- Hedge Fund Questions and Answers, Legal Resources, Uncategorized -
- Tags : broker-dealer, hedge fund, Series 7
- 1 Comment
As I’ve noted in many of my posts, I will try my best to answer your questions or point you to a post within the site which discusses the subject. Below is a common question for licensed brokers who are getting into the hedge fund industry.
Question: I currently hold a series 7 agent license as well as a series 65. I am employed with a broker dealer and soon will make a job change to a hedge fund as a marketer. Can the hedge fund maintain my licenses even though they are not a broker dealer and given the fact that I do not need to have a series 7 license to market the hedge fund? I do not want my license to lapse while in the employ of the hedge fund. I do know that FINRA will hold my license for 24 months before expiring. I would like to maintain my licenses and keep them current by fulfilling my continuing education responsibilities. Please advise.
Answer: No, unfortunately the hedge fund will not be able to “hold” your license if it (or a related entity) is not a broker-dealer. Only a FINRA licensed broker-dealer will be able to “hold” your license – and by “hold” we mean that you would be registered as a representative of the broker-dealer.
This should not be confused with “parking” a license with a broker-dealer which is illegal under FINRA rules. Parking a license basically means that you are registered with a broker-dealer for no business reason other than to keep your licenses current. In the situation above, as you noted, the series 7 designation will expire two years after a U-5 has been submitted by your employing broker-dealer.
One potential way to keep the license is to stay on with your broker dealer and conduct your hedge fund selling activities through the broker-dealer. This may not be possible for a number of business reasons and the broker-dealer may not have the proper compliance procedures in place to market and sell hedge fund interests to its customers. For this reason staying with a broker often is not a viable option and unfortunately I have not come across a good solution to this very common problem.
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