State Registered Investment Advisors
Some IAs must register with the state rather than with the SEC. If you register through your state, you are regulated by the Uniform Securities Act instead of the Investment Advisers Act of 1940.

Determining Whether Federal (SEC) or State Registration is Required
The National Securities Markets Improvement Act of 1996 divides registration and oversight responsibilities between state and federal securities regulators.

  • The value of client assets under management is one key indicator of whether you must register with the SEC instead of with your individual state.
    • "Assets under management" means securities portfolios for which an investment advisor provides continuous and regular supervisory or management services.
    • Under the NSMIA, the SEC generally registers investment advisor firms with over $25 million in assets under management, while the states register investment advisor firms with under $25 million in assets under management.
    • If assets under management equal $30 million or more, an IA must register with the SEC. Those with client assets under management between $25 and $30 million may register with the SEC or their individual state(s). Those with a lesser amount of client funds must register with their state instead.
The following table summarizes the above requirements:

IAs IA Firms
Less than $25M State Registration* State registration
Between $25M and $30M SEC or State registration n/a
More than $25M n/a SEC registration
More than $30M SEC registration n/a

*There are certain situations that require IAs with less than $25 million to register with the SEC instead of their state(s):
  • IAs whose only clients are other registered investment companies.
  • IAs whose state does not regulate investment advisors.
  • Pension consultants who provide advice to employer retirement plans with assets of at least $50 million.
  • Newly formed IAs who reasonably believe they will become eligible for federal registration within 120 days.

Look Out!
Note that all IAs, even those not required to register, are subject to the anti-fraud provisions of the Act.



Registration and Licensing (Contd.)

Related Articles
  1. Financial Advisor

    Becoming A Registered Investment Advisor

    To become a registered investment advisor requires specific licensing, qualifications and regulations, but the greater freedom may be worth it.
  2. Financial Advisor

    Advisors Face More SEC Reporting Requirements

    The SEC has mandated that investment advisors provide more disclosure on separately managed accounts and performance numbers used in advertising.
  3. Insights

    Understanding the SEC

    The SEC's triple mandate of investor protection, maintenance of orderly markets and facilitation of capital formation makes it a vital player in capital markets.
  4. Managing Wealth

    Trade Name Vs. Trademark: Know the Difference

    Understand the differences between a trade name and a trademark, the different functions they serve and registration considerations for business owners.
  5. Financial Advisor

    Address These Concerns to Avoid SEC Scrutiny

    These are the key issues that the SEC is currently focusing on that advisors need to be aware of to stay compliant with regulations.
  6. Financial Advisor

    How To Get A Job At The SEC

    Want to make a good living taking on those renegade trading rascals on Wall Street? Here are some tips to help you get in the door at the SEC.
  7. Financial Advisor

    Is Your Broker Legit? 6 Steps to Take

    The Great Recession may have ended, but broker wrongdoing hasn't. Here's how to make sure you don't get stuck with the next Bernie Madoff.
  8. Insights

    The SEC: A Brief History Of Regulation

    The SEC has continued to make the market a safer place and to learn from and adapt to new scandals and crises.
  9. Investing

    What's an Investment Advisor?

    An investment or financial advisor makes investment recommendations and analyzes securities.
  10. Financial Advisor

    Top SEC Exam Hacks for Financial Advisors

    These five tips will help financial advisors pass muster when the SEC comes knocking.
Frequently Asked Questions
  1. Depreciation Can Shield Taxes, Bolster Cash Flow

    Depreciation can be used as a tax-deductible expense to reduce tax costs, bolstering cash flow
  2. What schools did Warren Buffett attend on his way to getting his science and economics degrees?

    Learn how Warren Buffett became so successful through his attendance at multiple prestigious schools and his real-world experiences.
  3. How many attempts at each CFA exam is a candidate permitted?

    The CFA Institute allows an individual an unlimited amount of attempts at each examination.Although you can attempt the examination ...
  4. What's the average salary of a market research analyst?

    Learn about average stock market analyst salaries in the U.S. and different factors that affect salaries and overall levels ...
Trading Center