Your advisory firm opens an office across a state line. Its federal registration may stay unchanged, while state filings and your own representative registration become necessary.
Before accepting advisory business, identify the firm, the people serving clients, and the regulator responsible for each. Each state regulates advisers under its own securities law, so a common model keeps requirements similar for a firm working across state lines. The Uniform Securities Act of 1956, as amended (USA), supplies the tested state framework. The North American Securities Administrators Association (NASAA) develops model rules, which bind a state only as adopted there.
An investment adviser is a person or firm in the business of providing advice or analyses about securities for compensation. Apply this three-prong test under USA §401(f) and federal Advisers Act §202(a)(11): securities advice, business activity, and compensation. Advice can concern securities values, purchases, sales, or investment choices.
Compensation can be included in a broader planning fee. A financial planner charging for a plan that recommends securities can therefore be an investment adviser.
Common mistakes
- Treating all filings as registration. An ERA's 60-day initial report does not make it a federal covered adviser.
- Ignoring boundary words. Exactly $150 million fails the private-fund exemption, while exactly $1.4 million managed satisfies that qualified-client monetary test.
- Treating every employee benefit plan as institutional. Only a plan with at least $1 million in assets is a specified institution under the USA; a $900,000 plan counts toward the five other clients.
Bottom line
- Investment adviser status generally requires securities advice, business activity, and compensation; exclusions and registration exemptions are different.
- The USA no-office exemption permits specified institutional clients or no more than five other clients during the preceding 12 months.
- SEC registration is generally optional at $100 million, required at $110 million, and retained down to $90 million.
- ERAs report under specified venture-capital or private-fund exemptions and remain subject to antifraud provisions.
Exam shortcut
Circle the actor before choosing an answer: adviser firm, ERA, or individual IAR. A firm's federal status does not settle its representative's registration. Mark whether an office exists before counting clients. Then separate specified institutions from other clients when the question invokes the USA. For AUM questions, underline whether the firm is entering SEC registration or already registered. Apply the threshold associated with that status.
The full lesson (about 4,441 words, 30 min read) adds 2 worked examples, all 6 common mistakes, a self-check, free in the app.
Learning objectives
- D19
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