Wells Fargo employees opened 3.5 million unauthorized accounts to hit sales targets. The SEC, FINRA, OCC, CFPB, and state regulators all brought separate enforcement actions. That one scandal is a crash course in why this industry has overlapping regulators, multiple registration frameworks, and disclosure requirements that seem redundant, until the moment they are not.
HIGH-FREQUENCY: Under the Investment Advisers Act of 1940, the single most important factor is assets under management (AUM):
- $110 million or more: SEC registration is required
- $100 million to $110 million: buffer zone, the adviser may choose the SEC or the state, which prevents constant switching
- Less than $100 million: register with the state securities regulator
Exceptions worth knowing: advisers to registered investment companies (mutual funds) must register with the SEC regardless of AUM. Advisers required to register in 15 or more states may register with the SEC instead. An adviser already SEC-registered does not have to withdraw until AUM falls below $90 million.
For the exam, anchor on three numbers: under $100M is state, $100M to $110M is the adviser's choice, and $110M or more is SEC.
Common mistakes
- Confusing the SEC registration threshold. The test is AUM, not revenue and not a single client's account, and it has three bands: below $100M is state, $100M to $110M is the adviser's choice, and $110M or more requires the SEC. Trap: "The firm manages $85 million and must register with the SEC."
- Confusing Form ADV Part 1 with Part 2A. Part 1 goes to the regulator. Part 2A goes to the client. Trap: "The adviser must deliver Form ADV Part 1 to the client before entering the advisory agreement."
- Not knowing the CFP Series 65 exemption. Holding the CFP designation exempts you from the Series 65 in most states. The exam tests this directly.
Bottom line
- $110M+ AUM requires SEC registration; under $100M is state; $100M to $110M is the adviser's choice
- Form ADV Part 1 goes to the regulator; Part 2A (client brochure) goes to the client; Form CRS is the short-form comparison document
- Series 7 = broad (all securities); Series 6 = narrow (mutual funds, variable products only)
- CFP designation exempts from Series 65 in most states
Exam shortcut
For registration questions, place the AUM figure against the $100M and $110M lines immediately, that determines SEC vs. state. For Form ADV, remember "Part 1 = Regulator, Part 2A = Client." For licensing questions, match the product to the license: individual stocks need a Series 7; mutual funds and variable products work with a Series 6. For AML, remember "10K CTR" and that structuring below $10,000 is itself illegal.
The full lesson (about 3,572 words, 24 min read) adds 2 worked examples, all 9 common mistakes, a self-check, free in the app.
Learning objectives
- A.4
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