NASAA Series 63Regulation of Investment Advisers and IARsHard
An investment adviser firm reports regulatory assets under management of $115 million on its most recent annual updating amendment. Under the Investment Advisers Act of 1940 and NASAA guidance, this firm is:
- AA mid-size adviser that may choose either state or SEC registration
- BRequired to register with the SEC as a federal covered adviser because it exceeds the $110 million mandatory threshold
- CExempt from registration entirely because it manages private funds
- DA state-registered adviser, since it manages less than $150 million
Show answer & explanationAnswer & explanation
Correct answer: B. Required to register with the SEC as a federal covered adviser because it exceeds the $110 million mandatory threshold
Advisers with $110 million or more in AUM are generally required to register with the SEC as federal covered advisers. The $100-$110 million range is a buffer zone allowing already-SEC-registered advisers to remain registered, but $115 million clearly exceeds the mandatory threshold, requiring SEC registration.
Why the other options are wrong
- A. Mid-size advisers fall in the $25-100 million range, not $115 million.
- C. Nothing in the facts indicates the firm advises only private funds.
- D. $115 million exceeds the state-registration ceiling; SEC registration is mandatory.
Federal Covered Adviser Threshold
Investment advisers with $110 million or more in regulatory AUM must register with the SEC as federal covered advisers rather than with the states.
- $100-110 million buffer zone lets existing SEC registrants stay registered
- Below $100 million (generally $25-100M) = mid-size, usually state-registered
- States may still require notice filing and fees from federal covered advisers
Memory trick: 110 million or more, knock on the SEC's door