The National Securities Markets Improvement Act of 1996 (NSMIA), referenced in the Foundation for Regulatory Issues section, 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.
     
  • Those with a lesser amount of client funds must register with their state instead.

There are certain situations that require IAs with less than $25 million to register with the SEC instead of their state:

  • 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

In addition, there are several categories of investment advisors who are required to register with the SEC instead of the individual State:

  • Nationally Recognized Statistical Rating Organizations (NRSROs)
  • Consultants who advise pension plans with assets over $50 million
  • Any advisor that believes it may be required to register with the SEC within 120 days of initial state registration
  • Investment advisors counseling registered investment companies

Please note that all IAs, even those not required to register, are subject to the anti-fraud provisions of both the USA and the Investment Advisers Act of 1940.



Additional Information

Related Articles
  1. Financial Advisor

    SEC on Advisor Performance Claims: 'Show Your Work'

    The SEC will now require advisors to keep records of any documentation that is distributed to clients that contains performance numbers of any kind.
  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. Financial Advisor

    What Are the Chances You'll Get a Visit From the SEC?

    If you are an RIA registered with the SEC, the odds are fairly low that you will receive a visit from one of its examiners this year.
  4. Financial Advisor

    A Review of SEC Enforcement Cases in 2016

    The SEC set a new record in 2016 for the number of enforcement actions it brought.
  5. 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.
  6. Financial Advisor

    Top SEC Exam Hacks for Financial Advisors

    These five tips will help financial advisors pass muster when the SEC comes knocking.
  7. 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.
  8. Financial Advisor

    Is Your Financial Advisor Looking Out for You?

    Financial advisors sometimes aren't looking out for clients' best interests. Regulators are scrutinizing their practices; investors should too.
  9. Investing

    What's an Investment Advisor?

    An investment or financial advisor makes investment recommendations and analyzes securities.
  10. 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.
Frequently Asked Questions
  1. What is the formula for calculating compound annual growth rate (CAGR) in Excel?

    The concept of CAGR is relatively straightforward and requires only three primary inputs: an investments beginning value, ...
  2. How do you calculate return on equity (ROE)?

    Return on equity (ROE) is a ratio that provides investors with insight into how efficiently a company (or more specifically, ...
  3. What is the difference between Communism and Socialism?

    Learn how some countries are incorporating socialist methods into capitalism.
  4. What's the difference between a stop and a limit order?

    A limit order is an order that sets the maximum or minimum at which you are willing to buy or sell a particular stock. With ...
Trading Center