NASAA Series 63Regulation of Investment Advisers and IARsMedium
A federal covered adviser has no place of business in State Y but has 20 retail clients there. Under the Uniform Securities Act, what may State Y require of this adviser?
- AA notice filing and payment of the applicable state fee, since full state registration authority does not apply to federal covered advisers
- BFull state registration as an investment adviser, including examination of its books and records
- CNothing at all, since federal covered advisers are completely outside state jurisdiction for any purpose
- DState registration only if the adviser exceeds 25 retail clients in that state
Show answer & explanationAnswer & explanation
Correct answer: A. A notice filing and payment of the applicable state fee, since full state registration authority does not apply to federal covered advisers
States cannot require full registration of federal covered advisers due to federal preemption under NSMIA. However, states may still require a notice filing and collect a filing fee, and retain antifraud authority. Full registration authority does not apply here.
Why the other options are wrong
- B. Full registration authority over federal covered advisers is preempted by federal law (NSMIA).
- C. States retain limited jurisdiction, such as antifraud enforcement and notice filing requirements.
- D. There is no specific client-count threshold that triggers full state registration for federal covered advisers.
Notice Filing for Federal Covered Advisers
States cannot require full registration of federal covered advisers but may require notice filings and fees, and retain antifraud jurisdiction.
- NSMIA preempts state registration of federal covered advisers
- Notice filing = copy of Form ADV plus a fee
- States keep antifraud enforcement authority
Memory trick: Notify, don't register.