Your firm can hold the right registration while you still lack permission to advise clients. Your own duties, office locations, filings, and continuing education determine your position.
Before advising a customer, separate the advisory business from the individual doing its work. An investment adviser is the person or firm providing investment advice as a business. An investment adviser representative (IAR) is an individual associated with that adviser who performs covered functions.
The state securities regulator is the Administrator. IARs register with state Administrators, including when their adviser registers with the Securities and Exchange Commission (SEC). An SEC-registered firm is a federal covered adviser.
The state framework here is the Uniform Securities Act of 1956 (USA), as amended. It is a model act written to make state securities law uniform, and each state enacts its own version. The North American Securities Administrators Association (NASAA) also develops model rules. Those models bind a jurisdiction only when adopted there. Check the adviser's regulatory category before applying an IAR definition or registration exception.
Common mistakes
- Treating six ordinary clients as automatic federal IAR status. Six out of 60 is exactly 10%, so the percentage test still fails.
- Using the five-client exception despite a home office. The state-adviser exception requires no place of business in that state.
- Treating a passing score as permission to advise immediately. Examination qualification leaves registration effectiveness unresolved.
Bottom line
- IAR registration is with state Administrators, including for representatives of federal covered advisers.
- The federal IAR definition requires more than five counted natural-person clients and more than 10% of total clients, subject to its exclusions.
- State-adviser no-office exceptions use specified institutions or no more than five other clients during the preceding 12 months.
- Federal-adviser IARs are subject to state registration only where they have a place of business.
Exam shortcut
Circle who the question regulates: the adviser, its IAR, or the same person's agent role. Then underline whether the adviser is state-registered or federally registered. When client counts appear, label the numerator before calculating. Check both strict inequalities, then examine exclusions and office locations. For Form U4 questions, mark four details: event type, named versus subject, time window, and dollars.
The full lesson (about 4,224 words, 28 min read) adds 2 worked examples, all 6 common mistakes, a self-check, free in the app.
Learning objectives
- D20
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