Regulation of Investment Advisors - State Registered Investment Advisers

Some IAs must register with the state rather than with the SEC. We will explain how to determine which registration is required below. If you register through your state, you are regulated by the Uniform Securities Act instead of the Investment Advisers Act of 1940. Under the Uniform Securities Act, you must register as an investment adviser if you provide any of the following services for compensation:

  • Engaging in the business of advising others, either directly or indirectly (such as via a newsletter), as to the value of securities or the advisability of investing in securities; OR
  • Issuing analyses or reports on a regular basis as part of a business; OR
  • Providing investment advisery services to others in a financial planning practice.

An IA must register in every state where he or she does business with clients, whether or not he/she actually maintains a place of business in the state. The only exemption is for advisers with no place of business in a state who:

  • Only deal with institutional investors OR
  • Have five or less clients in that state

If an existing client is temporarily visiting another state, the IA is not subject to registration requirements in the second state.

Look Out!
Note that the definitions and exclusions for state covered advisers and federal covered advisers are similar but not identical.

Exclusions from this definition include:

  • Banks, savings and loans, trusts
  • Professionals, such as lawyers and accountants, whose advice is incidental to their professional practice
  • Broker-dealers whose advice is incidental to the conduct of their business and who receive no special compensation for these services
  • Publishers, employees, or columnists of bona fide newspapers, news magazines, business or financial periodicals, and owners and employees of cable, radio, or TV networks where the content is NOT based on the specific investment situation of each client
  • Federal covered advisers

Look Out!
Notice that this Uniform Securities Act definition for IAs who must register if they have out of state clients is very different from the one under the Investment Advisers Act of 1940 mentioned in the earlier section. On the exam, make sure you determine whether a question is about a state-registered or a federally-registered IA.

Federal (SEC) vs. State Registration
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