Regulation of Investment Advisors and Investment Advisor Representatives - State Registered Investment Advisors

Some IAs must register with the state rather than with the SEC (see the section below). If you register through your state, you are regulated by the Uniform Securities Act (USA) instead of the Investment Advisers Act of 1940. Under the USA, you must register as an investment advisor 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 advisory services to others in a financial planning practice

Exclusions from this definition include the following:

  • 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 advisors
     
  • Investment advisor representatives
     
  • Any other person that is excluded by the Investment Advisers Act of 1940 from the definition of investment advisor; or
     
  • Any other person excluded by the Administrator

Note that the definitions and exclusions for state covered advisors and federal covered advisors are similar but not identical.
 

Look Out!
The acid test for a publication (and you could easily see a question regarding Internet publications on the exam) is whether the publisher gives advice on the specific situations of clients. If a publication does not advise clients of stock-specific information and is a "bona-fide" publication (for example, the Wall Street Journal Online), it is not an investment advisor.

 

Stop!
Refer to Appendix C for the Uniform Securities Act.

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

  • only deal with professional investors
    OR
  • have five or fewer clients in that state.

Look Out!
Notice that this USA 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 an IA who is state registered or federally registered.

Registration with the SEC or with the State?


Related Articles
  1. Professionals

    State Registered Investment Advisers

    FINRA/NASAA Series 65 - State Registered Investment Advisers. In this section registering with the state and exclusions.
  2. Professionals

    Introduction

    FINRA/NASAA Series 66: Section 8 Regulation of Investment Advisors and Investment Advisor Representatives. This section explains who an investment advisor is and related registration concerns.
  3. Professionals

    Registration and Licensing

    Registration and Licensing
  4. Professionals

    Investment Advisors Act of 1940

    FINRA Series 6 Exam Study Guide - Investment Advisors Act of 1940. This section defines investment advisor, IA 1092 and Investment Advisor Representatives.
  5. Professionals

    Federal (SEC) vs. State Registration

    FINRA/NASAA Series 65 - Federal (SEC) vs. State Registration. In this section the value of client assets and sample questions.
  6. Professionals

    Registration with the SEC or with the State?

    FINRA/NASAA Series 66: Section 8 Registration with the SEC or with the State? This section discusses whether one should rregister with the SEC or the State.
  7. Professionals

    Exclusions from IA Registration

    FINRA/NASAA Series 65 - Exclusions from IA Registration. In this section inivestment advisor registration: exclusions vs. examptions.
  8. Professionals

    State Securities and Insurance Laws

    State Securities and Insurance Laws
  9. Professionals

    Additional Information

    FINRA/NASAA Series 66: Section 8 Additional Information. In this section additional information on IA registration with sample questions.
  10. Professionals

    Investment Advisor Representatives: Exclusions

    FINRA/NASAA Series 66: Section 8 Investment Advisor Representatives: Exclusions. This section deals with IAR exclusions with illustrative examples and sample questions.
RELATED TERMS
  1. Registered Investment Advisor - ...

    An advisor or firm engaged in the investment advisory business ...
  2. Federal Covered Advisor

    An investment advisor in the United States that manages more ...
  3. Investment Advisor

    As defined by the Investment Advisors Act of 1940, any person ...
  4. Financial Adviser

    A professional who helps individuals manage their finances by ...
  5. Investment Advisers Act of 194 ...

    A piece of legislation passed in 1940 that, among other things, ...
  6. Financial Advisor

    One who provides financial advice or guidance to customers for ...
RELATED FAQS
  1. The de Minimis clause for investment advisers means:

    A. An investment adviser must register with the state if it holds less than $25 million in assets.B. An investment adviser ... Read Answer >>
  2. Do financial advisors need to be approved by FINRA?

    Learn about whether a financial advisor may be required to be approved by FINRA, and what exams a financial advisor needs ... Read Answer >>
  3. Under the Uniform Securities Act, which of the following advisers is NOT defined ...

    The correct answer is b). Federal covered advisers include those who manage client assets of $25,000,000 or more or who advises ... Read Answer >>
  4. Are hedge funds registered with the Securities and Exchange Commission (SEC)?

    Learn the conditions that require hedge fund advisors to register with the U.S. Securities and Exchange Commission. Read Answer >>
  5. Under the Uniform Securities Act, the registration of an investment adviser results ...

    The correct answer is b. Clerical employees do not need to be registered as investment adviser representatives, while solicitors, ... Read Answer >>
  6. Do financial advisors work only in banks?

    Learn how financial advisors are employed not only by various financial institutions, such as banks, but an increasing number ... Read Answer >>
Hot Definitions
  1. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  2. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  3. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  4. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
  5. Generally Accepted Accounting Principles - GAAP

    The common set of accounting principles, standards and procedures that companies use to compile their financial statements. ...
  6. DuPont Analysis

    A method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are ...
Trading Center