A supervised person of a federal covered investment adviser maintains a place of business in State Q and, over the preceding 12 months, has provided investment advice to 8 retail clients who are natural persons residing in State Q. Under the Uniform Securities Act, this supervised person:
- Amust register as an investment adviser representative in State Q because more than five retail clients who are natural persons are served from a place of business there
- Bis excluded from investment adviser representative registration because the adviser itself is federal covered
- Cmust register only if the assets under management attributable to those clients exceed $1 million
- Dis exempt because supervised persons of federal covered advisers never register at the state level
Show answer & explanationAnswer & explanation
Correct answer: A. must register as an investment adviser representative in State Q because more than five retail clients who are natural persons are served from a place of business there
A supervised person of a federal covered adviser is treated as an IAR subject to state registration if they have a place of business in the state and, in the preceding 12 months, have had more than five retail clients who are natural persons resident in that state. This individual exceeds that threshold and must register.
Why the other options are wrong
- B. Federal covered status of the adviser does not automatically exclude its supervised persons from state IAR registration.
- C. There is no AUM-based threshold for this rule; it is based on number of retail clients.
- D. Supervised persons can be required to register as IARs at the state level under this specific threshold rule.
Federal Covered Adviser Supervised Person Registration
A supervised person of a federal covered adviser must register as an IAR in a state if they maintain a place of business there and have more than five retail clients who are natural persons resident in that state.
- Threshold is 'more than five' retail natural-person clients in 12 months
- Requires a place of business in the state to trigger registration
- Institutional clients do not count toward the five-client threshold
Memory trick: Five's the line — cross it, sign