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.
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
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
Financial AdvisorLearn the importance of having a financial adviser whom you can trust and why questioning the funds he selects is part of that process.
TechSeveral things factor into the salary of a financial advisor. Here's a look.
Personal FinanceRead an in-depth review of the differences between a career as a financial Adviser versus a career as a Financial Analyst, including how to decide which is best.
RetirementSavvy financial advisers will either need to gain Social Security advice expertise or find a source or partner to provide this vital service to clients.
Financial AdvisorThese five tips will help financial advisors pass muster when the SEC comes knocking.
Financial AdvisorOnce you've hired a new adviser, an equally important process begins: training them.
Financial AdvisorThe internet has provided a convenient way for financial advisors to offer their services to a wide customer base through virtual financial advising.
Financial AdvisorThe Series 65 is required in many states in order to be a fee-based advisor. Find out what it is and whether you need it.
Financial AdvisorShould you use an online financial planning service, or do professional, fee-based financial planners justify their higher costs?
Financial AdvisorTo become a registered investment advisor requires specific licensing, qualifications and regulations, but the greater freedom may be worth it.