Consumer Financial Services Alert
Making the Most of Licensing Renewals
As we find ourselves in the midst of license renewal season (which began on November 1st and runs through the end of the year), you may find yourself wondering, how do I ensure compliance in every jurisdiction in which my company holds a license? Renewal requirements vary by state and by license, ranging from a simple fee to specific documentation that must be submitted to the regulator. Below are some tips to help licensees in tracking renewal requirements year-round and filing timely renewal submissions.
Preparing to File: What, How, and When?
On a high level, renewal involves indicating that the licensee wishes to maintain the license and ensuring the licensee’s business information is current with the regulator. The method of renewal submission will vary by state and by license. Some renewals require a paper filing, whether via email or postal mail, while others are submitted through a state-specific online system or handled through the NMLS.
For licenses managed on the NMLS, state regulators release renewal checklists to guide licensees in gathering required information. (The 2021 checklists are available now.) While checklists are helpful, these regulators may update or revise the checklist after its release, as well as request different or additional information. It is a good rule of thumb to keep an eye on checklists in the NMLS before requesting renewal. In addition to noting what documentation will be required, the checklists also indicate due dates, renewal fees, and whether a particular license can be reinstated if a renewal deadline is missed.
For licenses managed outside the NMLS, an important consideration is how renewal filings need to be executed and submitted. Does the form need to be signed by an officer? Does it require notarization? Once executed, will it be submitted via mail, email, or state specific online system? With current restrictions due to COVID, there may be additional logistical hurdles to completing submissions properly. We recommend allowing additional time to account for COVID operational issues. A number of regulators require that paper filings be received, not postmarked, by the renewal deadline.
Whether the license is managed on or off the NMLS, licensees should keep an eye out for notices detailing submission requirements delivered via email or postal mail, updates on the regulator’s website, or even posted to the NMLS.
Finally, it is always beneficial to have all submission deadlines calendared and understand the risks if a deadline is missed. Some regulators have the flexibility to grant an extension, whereas others are statutorily prohibited from changing the submission deadline.
Accurate Company Information
Licensees are generally required to ensure the accuracy of the information on file with the regulator, especially when the license is managed on the NMLS, before or at the time of renewal. For example, the NMLS attestation language found within the Company Form (MU1), Branch Form (MU3), and Individual Form (MU2/MU4) requires the person attesting to verify that the information contained therein is current, true, complete, and, to the extent information changes, to agree to file supplementary information on a timely basis. Moreover, the NMLS instructs licensees to ensure the accuracy of its information before requesting renewal.
Note that minor modifications to company information can be made as changes occur or shortly thereafter. However, there are certain changes (including ownership changes, address changes, and officer/director changes) that may require an advance change notice and/or regulator approval. Changes of this kind and other important changes need to be managed proactively to avoid fines or license revocation for failing to provide proper notice and/or obtain required approvals.
With respect to the Individual Form (MU2), officers, directors, indirect and direct owners, qualifying individuals (QIs), and branch managers should be mindful to keep their information on the NMLS current. Particular attention should be given to updating the Individual Form for name changes, changes in residential address, changes in disclosure questions, and personal contact information.
Many regulators require financial information to be submitted as part of the renewal process. This information generally includes updated surety bonds and financial statements. It may even include updated fidelity bonds and E&O policies. In terms of the financial statements, some state regulators require audited financial statements for the prior year to be provided. Other state regulators allow unaudited statements or even parent company financial statements. Every state (and license) is different, so do your homework on what is required for the licenses your company holds.
Risk of Failing to File
The consequences associated with failing to file renewals properly varies from state to state, and from license to license, depending on the language of the state’s statutes and regulations. Some states allow for late renewals, while others may allow for reinstatement. Note that if reinstatement is allowed, a licensee should understand whether the state allows continuation of business. Many do not. If the state does not allow a late filing or reinstatement, a licensee could be required to reapply and obtain a new license. The ultimate risk for failing to file a renewal or to meet an ongoing reporting obligation is operating without a license.
As you navigate renewal season, annual reporting, and ongoing licensing activities, remember that McGlinchey’s multidisciplinary Licensing Team is only a phone call away.