14.3 IARs of Federal Covered Advisers
Key Takeaways
IARs always register at the state level, even for SEC-registered advisers.
IARs of federal covered advisers register only where they have a place of business.
IARs of state-registered advisers register where they have a place of business and in other states beyond the de minimis limit.
States can require exams, fees, and discipline IARs.
States cannot require the federal covered adviser itself to register.
Dual-registered IARs and agents must follow both sets of rules.
When an investment adviser is registered with the SEC (federal covered adviser), special rules govern the registration of their Investment Adviser Representatives. Understanding the interaction between federal and state jurisdiction is critical.
Key Principle: IARs Always Register at State Level
Regardless of whether the investment adviser is SEC-registered or state-registered, IARs always register at the state level. There is no federal registration for IARs.
| Entity | Registration Level |
|---|---|
| SEC-Registered Adviser | Federal (SEC) |
| State-Registered Adviser | State |
| IAR of SEC Adviser | State |
| IAR of State Adviser | State |
Place of Business Rule
IARs of Federal Covered Advisers
IARs of SEC-registered advisers have a more limited state registration requirement:
| Requirement | Details |
|---|---|
| Registration Trigger | Must have a "place of business" in the state |
| No Place of Business | No registration required in that state |
| Contrast | IARs of state-registered advisers register in each state where they have a place of business, and in other states unless the no-place-of-business (de minimis) exemption applies |
Definition of "Place of Business"
An IAR has a "place of business" in a state if they:
| Situation | Place of Business? |
|---|---|
| Office Location | Yes—physical office in the state |
| Meet Clients at Location | Yes—regularly meets clients at a location |
| Hold Out as Available | Yes—advertises presence in the state |
| Work from Home | Yes—if home is in the state |
| Only Phone/Email Contact | No—if no physical presence |
| Travel to State Occasionally | Generally No—unless regular presence |
Comparison: IARs of Federal vs. State Advisers
| Scenario | IAR of Federal Covered Adviser | IAR of State-Registered Adviser |
|---|---|---|
| Office in State A, calls clients in State B | Register in State A only | Register in State A; also in State B unless the de minimis exemption applies (no more than five non-institutional clients there in 12 months) |
| No office, all clients reached remotely | Register where IAR is located | Register where the IAR is located, plus each client state beyond the de minimis limit |
| Multiple offices in different states | Register in each office state | Register in each office state + client states beyond the de minimis limit |
On the Exam: This is a frequently tested distinction. IARs of federal covered advisers register only where they have a place of business, while IARs of state-registered advisers also register in states where they have clients unless the de minimis exemption (no place of business, no more than five non-institutional clients in 12 months) applies.
State Authority Over IARs
States CAN Regulate IARs of Federal Covered Advisers
| Authority | Details |
|---|---|
| Registration | Require IAR registration in the state |
| Qualification Exams | Require Series 65 or Series 66 |
| Fees | Collect registration fees |
| Investigation | Investigate IAR misconduct |
| Discipline | Suspend, revoke, or bar IARs |
| Continuing Education | Require CE compliance |
| Books and Records | Examine IAR-related records |
States CANNOT Regulate the Federal Covered Adviser Itself
| Limitation | Details |
|---|---|
| Cannot Require Adviser Registration | SEC-registered advisers don't register with states |
| Cannot Impose Different Standards | Cannot add substantive requirements on the adviser |
| Cannot Charge More Than Notice Fees | Limited to notice filing fees |
| Cannot Require Different Disclosures | Must accept federal disclosure requirements |
Federal Covered Adviser Notice Filing
Requirements
| Requirement | Details |
|---|---|
| When Required | If adviser has place of business OR 6+ clients in state |
| Filing | Form ADV notice filing with state |
| Fees | State notice filing fees |
| Timing | Varies by state—often within 30-60 days |
De Minimis Exemption
| Element | Requirement |
|---|---|
| No Place of Business | No office in the state |
| Client Limit | 5 or fewer clients in the state in 12 months |
| Result | No notice filing required |
Multi-State Registration for IARs
Process
| Step | Details |
|---|---|
| Initial State | Register in home state where IAR is located |
| Additional States | File Form U4 for each additional state |
| Exam | Same exam valid for all states |
| Fees | Separate fees for each state |
| CE | May have different CE requirements by state |
Practical Considerations
| Consideration | Details |
|---|---|
| State Differences | Requirements may vary |
| Fee Management | Track multiple state fees |
| Renewal Timing | Most renew December 31 |
| Record Keeping | Maintain records for each state |
Dual Registration: IAR and Agent
Many individuals are registered as both an IAR and a broker-dealer agent:
Requirements
| Aspect | Rule |
|---|---|
| Separate Registrations | Must hold both registrations |
| Different Standards | Must comply with both sets of rules |
| Stricter Rule Applies | When rules conflict, follow more restrictive |
| Separate Exams | Different exam requirements for each |
| Combined Supervision | Firm must supervise both roles |
Common Combinations
| Registration Path | Exams Required |
|---|---|
| IAR Only | Series 65 |
| Agent Only | SIE + Series 6 or Series 7 + Series 63 (most states) |
| Both (IAR + Agent) | SIE + Series 7 + Series 66 |
Key Takeaways
- IARs always register at the state level—even for SEC-registered advisers
- IARs of federal covered advisers register only where they have a place of business
- IARs of state-registered advisers register where they have a place of business and in client states beyond the de minimis limit
- States can require IAR registration, exams, fees, and discipline IARs
- States cannot require the federal covered adviser itself to register
- Dual-registered individuals (IAR + agent) must comply with both sets of rules
An IAR who works for an SEC-registered (federal covered) adviser must register with states where:
They have any clients
They have a place of business
The SEC directs them to register
They were born or educated
Which statement about state authority over IARs of SEC-registered advisers is TRUE?
States have no authority over these IARs
States can require the SEC-registered adviser to also register with the state
States can require IAR registration, qualification exams, and can discipline IARs
States can only collect fees but cannot investigate
An IAR of a federal covered adviser has an office in Texas and calls clients in Oklahoma and Kansas. The IAR must register in:
Texas, Oklahoma, and Kansas
Texas only (where the place of business is located)
Oklahoma and Kansas only (where the clients are)
No state registration is required
Sections you finish are checked off in the contents.