Registrations of Persons - Investment Adviser: Initial Registration and Requirements

Initial registration for an investment adviser is similar to a broker-dealer. If a person or an entity falls under the definition of an investment adviser he/she/it MUST register with the Administrator.

SEC versus the state:

  • If an investment adviser manages less than $25 million, his or her registration is under the USA, at the state level.

  • Those managing more than $30 million are required to register with the SEC. If an investment adviser registers with the SEC, he or she must give notice to the state adviser and pay filing fees.

  • An investment adviser with assets of $25 million to $30 million may register with the SEC or with the state - the choice is left up to the firm. In addition, there are several categories of investment advisers who are required to register with the SEC instead of states. They include:
    • Nationally Recognized Statistical Rating Organizations (NRSROs)
    • Consultants who advise pension plans with assets over $50 million
    • Any adviser that believes it may be required to register with the SEC within 120 days of initial state registration
    • Investment advisers managing the portfolios of registered investment companies such as mutual funds

Investment Adviser: Financial Requirements
At any time, the Administrator holds the power to demand that investment advisers meet certain minimum financial requirements. Since the Series 63 exam is based on NASAA amendments as well as the 1956 USA, it is helpful to look at the Model Rule for IAs:

NASAA Minimum Financial Requirements for Investment Advisers
Model Rule 202(d)-1
Adopted April 3, 2000, Amended April 18, 2004

Rule 202(d)-1. Minimum Financial Requirements for Investment Advisers

  1. An investment adviser registered or required to be registered under the act who has custody of client funds or securities shall maintain at all times a minimum net worth of $35,000 except:

    1. Advisers having custody solely due to direct fee deduction and complying with the terms described under Rule 102(e)(1)-1(a)6 and related books and records, as described in Rule 203(a)(2), shall not be required to comply with the net worth or bonding requirements of this rule.

  2. Advisers having custody solely due to advising pooled investment vehicles and complying with the terms described under Rule 102(e)(1)-1(a)7 or Rule 102(e)(1)-1(b)(3) and related books and records, as described in Rule 203(a)(2), shall not be required to comply with the net worth or bonding requirements of this rule.

Essentially, Administrators have the ability to require investment advisers to carry bonds or insurance if the aforementioned persons/entities have discretionary authorization or hold client funds. In short, if the Administrator feels that a situation is risky to the client, he/she may require bonds to protect clients against potentially excessive losses. If you need to recognize a dollar figure on the exam, go with the $35,000.

Investment Adviser: Update
If at any time a broker-dealer has any material change in vital information (i.e. address), it is to notify the Administrator immediately.

Investment Adviser: Renewal
Investment advisers must pay annual dues, and are additionally subject to periodic examination by the Administrator. In addition, investment advisers must file annual financial statements.

Exam Tips and Tricks
Series 63 Exam Flash Card - Investment Adviser

Is a person that:
  1. Offers advice regarding specific security-related information,
  2. Receives compensation for securities-related advice, or
  3. Is considered to be in the business of securities-related advice,

The entity IS an investment Adviser and must be registered as such, unless exempt.

  1. Investment adviser representative (IAR). These are the individuals who work for an investment adviser (IA).
  2. Individuals whose advice is incidental to their professional businesses. Think TEAL: teachers, engineers, accountants and lawyers
  3. Bona fide publications not issuing client-specific advice
  4. Broker-dealers providing advice as part of their normal business that DO NOT receive compensation for such. Note that often the exam will use the word, "remuneration," rather than compensation.
  5. Banks, savings institutions, or trusts. Notice, once again, how banks and bank-related entities are excluded.

Investment Adviser Representative (IAR): Definition
Related Articles
  1. Professionals

    Career Advice: Stockbroker Vs. Insurance Agent

    Compare and contrast careers as a stockbroker and insurance agent. Understand the skills and attributes required for success in each career.
  2. Economics

    Should the Fed Be More Worried About Asset Bubbles?

    While the Fed should be concerned that assets bubbles might impact economic stability, monetary policy is not the best tool to mitigate this threat.
  3. Economics

    What's the 1913 Federal Reserve Act?

    The 1913 Federal Reserve Act was a pivotal congressional act that helped establish the Federal Reserve System as it exists today. It is one of the United States financial system’s most influential ...
  4. Investing News

    Could a Rate Hike Send Stocks Higher?

    A rate hike would certainly alter the investment scene, but would it be for the better or worse?
  5. Professionals

    Will Interest Rates Rise at the Next Fed Meeting?

    Everyone wants to know what the Federal Reserve will do next, but the Fed doesn't even know what it's next move will be.
  6. Professionals

    Career Advice: Financial Analyst Vs. Investment Banker

    Read an in-depth comparison about working as a Financial Analyst vs. working as an Investment Banker, two highly prestigious business careers.
  7. Professionals

    3 ETFs to Play the Fed's Interest Rate Decision

    These three ETFs offer strong ways to play the Federal Reserve's decision not to raise rates.
  8. Professionals

    Who Needs to Take the Series 65?

    Most states require individuals to pass the Series 65 exam in order to act as investment advisors.
  9. Investing Basics

    How to Vet Financial Advisors Via BrokerCheck

    Many people research restaurants or movies, but few select brokers or financial advisors with much research. Here's how BrokerCheck can help.
  10. Professionals

    Career Advice: Financial Planner Vs. Stockbroker

    Read an in-depth review of a career as a financial planner as opposed to a career as a stockbroker, including how to decide which is best for you.
  1. Maintenance Margin

    The minimum amount of equity that must be maintained in a margin ...
  2. Series 6

    A securities license entitling the holder to register as a limited ...
  3. Comprehensive Automated Risk Data ...

    The Comprehensive Automated Risk Data System (CARDS) is an initiative ...
  4. Corporate Financing Committee

    A regulatory group that reviews documentation that is submitted ...
  5. Division Of Reserve Bank Operations ...

    An entity under the Federal Reserve System that manages certain ...
  6. Series 79

    A examination to ensure a candidate is qualified to become a ...
  1. Is there a limit on the number of times I can re-take the Series 63 exam?

    There is no limit to the number of times a candidate may retake the Series 63 exam. The North American Securities Administrators ... Read Full Answer >>
  2. How long must I wait after failing the Series 63 exam before I can take it again?

    Waiting periods are in place for candidates who wish to retake the Series 63 exam. Between retakes, the waiting period is ... Read Full Answer >>
  3. My 120-day Series 63 exam window is about to close, but I need more time to study. ...

    Extensions are available on rare occasions. Candidates should apply for an extension with the North American Securities Administrators ... Read Full Answer >>
  4. Do I have to be a U.S. citizen to sit for the Series 63 exam?

    United States citizenship is not required for Series 63 test-takers. Candidates may take the exam inside or outside the U.S. ... Read Full Answer >>
  5. Are waivers granted to the 180-day waiting period to re-take the Series 63 exam?

    Candidates retaking the Series 63 exam must wait for 30 days after failing it on the first or second attempt. After failing ... Read Full Answer >>
  6. If I failed the Series 66, does the waiting period apply if I want to take the Series ...

    The waiting period only applies to retaking the same North American Securities Administrators Association (NASAA) exam. Candidates ... Read Full Answer >>
  7. How often, and how, is a series 63 exam updated?

    Series 63 exams draw questions from a test bank based on state regulations, the Uniform Securities Act and North American ... Read Full Answer >>
  8. Are series 63 exams given outside of the United States?

    Series 63 exams are offered at authorized testing centers around the world. The exam does not require U.S. citizenship. Test ... Read Full Answer >>
  9. Does NASAA or anyone else give out the series 63 exam questions?

    Outside of the proctored exam, no access to Series 63 exam questions is offered. Providing access to questions would invalidate ... Read Full Answer >>
Hot Definitions
  1. Term Deposit

    A deposit held at a financial institution that has a fixed term, and guarantees return of principal.
  2. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s loss, so that the net change in wealth or benefit is zero. ...
  3. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
  4. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  5. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
  6. Normal Profit

    An economic condition occurring when the difference between a firm’s total revenue and total cost is equal to zero.
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!