CFP

Regulations and Requirements - Registration and Licensing (Contd.)

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.



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