13.2 Registration Requirements
Key Takeaways
$110M+ must register with the SEC; $100M-$110M may; under $100M register with states.
The buffer zone prevents switching until below $90M or above $110M.
Form ADV Part 1 is registration info; Part 2 is the client brochure.
Part 2 must be delivered before or at contract time.
Annual updating amendment is due within 90 days of fiscal year-end.
Registration Requirements for Investment Advisers
Investment advisers must register either with the SEC (federal) or with state securities regulators, depending primarily on their assets under management (AUM). This split was created by the National Securities Markets Improvement Act of 1996 (NSMIA), which added section 203A to the Advisers Act; the Dodd-Frank Act (2010) moved most mid-sized advisers ($25 million to $100 million) to state registration.
SEC vs. State Registration Thresholds
AUM-Based Registration Requirements
| AUM Level | Registration Requirement |
|---|---|
| $110 million+ | Must register with SEC |
| $100-$110 million | May register with SEC (buffer zone) |
| $25-$100 million | Must register with state(s) |
| Under $25 million | Must register with state(s) |
The Buffer Zone ($90-$110 Million)
The SEC created a buffer to prevent advisers from constantly switching between state and federal registration:
| Situation | Action Required |
|---|---|
| Reaches $110M | Must register with SEC within 90 days of annual filing |
| Falls below $90M | Must withdraw from SEC within 180 days and register with state |
| Between $90M-$110M | May remain with current regulator |
Calculating Regulatory AUM (RAUM)
| Include | Exclude |
|---|---|
| Securities portfolios with continuous supervision | Assets for which adviser provides no ongoing advice |
| Proprietary assets managed as if client assets | Assets under sub-adviser management |
| Family assets if required to report | Impersonal advisory services |
RAUM is calculated and reported annually in Form ADV.
SEC Registration Categories
Must Register with SEC (Regardless of AUM)
| Category | Reason |
|---|---|
| Advisers to Registered Investment Companies | Mutual funds, ETFs, closed-end funds |
May Register with SEC (Exempt from the Prohibition, Regardless of AUM)
| Category | Reason |
|---|---|
| Multi-State Advisers | Would otherwise be required to register in 15 or more states |
| Pension Consultants | Advise on at least $200 million of plan assets |
| Internet Advisers | Advise all clients exclusively through an operational interactive website |
Cannot Register with SEC
| Category | Reason |
|---|---|
| Under $25 million AUM | Too small (unless other exemption applies) |
| Under $100 million in fewer than 15 states | State-registered only |
On the Exam: Remember the key thresholds: $25M (minimum for SEC consideration), $100M (may register), $110M (must register), $90M (must withdraw if falls below).
Form ADV
Form ADV is the primary registration document for investment advisers.
Form ADV Part 1
| Section | Contents |
|---|---|
| Part 1A | SEC-registered advisers (business info, AUM, clients, disciplinary history) |
| Part 1B | State-registered advisers (additional state-required information) |
| Schedules | DRPs (Disclosure Reporting Pages) for disciplinary events |
Form ADV Part 2 (Brochure)
| Section | Contents |
|---|---|
| Part 2A | Firm Brochure - plain English description of services, fees, conflicts, disciplinary history |
| Part 2A Appendix 1 | Wrap Fee Program Brochure (if applicable) |
| Part 2B | Brochure Supplement - information about supervised persons providing advice |
Filing Through IARD
| Requirement | Details |
|---|---|
| System | Investment Adviser Registration Depository (IARD) |
| Annual Updating Amendment | Within 90 days of fiscal year-end |
| Material Changes | Prompt amendment required |
| Part 1 Updates | Promptly when specified items become inaccurate (Form ADV General Instruction 4) |
| Part 3 (Form CRS) | Within 30 days of becoming materially inaccurate (SEC-registered advisers) |
Client Delivery Requirements
Form ADV Part 2 Delivery
| Timing | Requirement |
|---|---|
| Initial | Before or at time of entering advisory contract |
| Annual | Within 120 days of fiscal year-end, if the brochure has materially changed (summary of material changes OR updated brochure) |
| Material Changes | Promptly, if disciplinary information (Part 2A Item 9) is added or materially revised: amended brochure or a statement of the change |
Part 2B (Brochure Supplement) Delivery
| Timing | Requirement |
|---|---|
| Initial | Before or at time supervised person begins providing advice |
| Updates | Promptly if disciplinary information (Part 2B Item 3) is added or materially revised |
State Registration Requirements
State-Registered Advisers
| Requirement | Details |
|---|---|
| Home State | Must register in state of principal office |
| Other States | Register where clients are located (unless de minimis exemption applies) |
| Filing | Form ADV through IARD |
| State-Specific | Some states have additional requirements |
Key Takeaways
- $110M+ = must register SEC; $100-$110M = may register SEC; under $100M = state
- Buffer zone prevents constant switching: stay until below $90M or above $110M
- Form ADV Part 1 = registration info; Part 2 = client brochure
- Part 2 must be delivered before or at time of entering advisory contract
- Annual updating amendment due within 90 days of fiscal year-end
An investment adviser with $120 million in regulatory AUM must:
Register with the state where the principal office is located
Register with the SEC
Register with both the SEC and all 50 states
Choose between SEC or state registration
Form ADV Part 2A must be delivered to clients:
Only upon client request
Before or at the time of entering into an advisory contract
Within 30 days after opening an account
Only if the client is a retail investor
An SEC-registered adviser must file an annual updating amendment to Form ADV:
Within 30 days of the calendar year-end
Within 90 days of the adviser's fiscal year-end
Within 120 days of the calendar year-end
Only when there are material changes
Sections you finish are checked off in the contents.