With this recent turbulent market, and amid layoffs and consolidations in the industry, many brokers are contemplating changing firms, or going out on their own with an independent broker-dealer or forming their own registered investment advisory.
While these decisions may prove to be a great choice for many, don't forget to consider the legal aspects that may be involved:
* Do you have a forgivable loan with your current firm? What's the balance on that, and how will you pay it back?
* Does that loan agreement forbid you from soliciting clients to a new firm until paid?
* What about covenants not to compete and no solicitation clauses? Do you know what's in the registered rep. agreement or contract you signed?
* What's changed that may require you to update my Form U-4? (Always a question to ask whether moving firms or not. Remember, under the rules, you have an obligation to keep this current?
* If you go to an independent firm, what are the costs that you'll be charged? Don't focus just on the higher payout percentage.
* What support will you receive? How easy is it to work with the firm's departments - operations, compliance, etc.?
* Do you need to form my own company for business purposes? What type? How to do it? What are the advantages and disadvantages of each type? How do you maintain the company to protect your assets as much as possible?
* What's involved in registering as an investment adviser? Do you need state or federal registration? What about registration in the various states and a de minimus exemption for a small number of clients?
These are just some of the issues involved in making some major career changes. If you're considering making a change, including going out on your own, consider consulting with a lawyer experienced in this area, as well as a CPA to help you make a plan, then successfully execute it.
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