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

    Becoming A Registered Investment Advisor

    To become a registered investment advisor requires specific licensing, qualifications and regulations, but the greater freedom may be worth it.
  2. Investing

    How To Start a Hedge Fund In the United States

    A general overview of how to start a hedge fund firm in the United States, including complying with state and federal regulations.
  3. Investing

    Explaining Assets Under Management

    Assets under management is a metric that measures the market value of assets that an investment company manages for investors.
  4. Investing

    What's an Investment Advisor?

    An investment or financial advisor makes investment recommendations and analyzes securities.
  5. 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.
  6. 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.
  7. Financial Advisor

    What Triggers an SEC Audit for Financial Advisors?

    Advisors looking to avoid an SEC audit should pay heed to this list of what may catch the regulator's attention.
  8. Financial Advisor

    Top SEC Exam Hacks for Financial Advisors

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

    Investment Advisor Versus Broker: How They Compare

    What is the difference between an investment advisor and a broker?
  10. Financial Advisor

    SEC to Audit RIAs Over Mutual Fund Share Classes

    The SEC plans to monitor the share classes that RIAs use when they invest their clients’ mutual fund money more closely.
Trading Center