NASAA Series 66 Uniform Combined State Law ExaminationLaws, Regulations, and Guidelines, including Prohibition on Unethical Business PracticesMedium
A federal covered investment adviser (FCIA) with its principal office in State A frequently provides investment advice to clients in State B. The FCIA has no physical office in State B. Which of the following statements is true regarding State B's regulatory requirements for this FCIA?
- AThe FCIA must register its investment adviser representatives (IARs) in State B, but the firm itself is exempt from filing.
- BThe FCIA is required to make a notice filing with the Administrator of State B.
- CThe FCIA must register as an investment adviser in State B if it has more than 5 clients there.
- DThe FCIA is exempt from any regulatory requirements in State B because it is federally covered.
Show answer & explanationAnswer & explanation
Correct answer: B. The FCIA is required to make a notice filing with the Administrator of State B.
Federal Covered Investment Advisers (FCIAs) are generally exempt from state registration. However, states can require FCIAs to make a 'notice filing' if they have a place of business in the state or have six or more non-institutional clients in the state. This allows the state to collect fees and monitor FCIA activities within its borders.
Why the other options are wrong
- A. If the FCIA is required to make a notice filing, its IARs would also need to register in State B if they have a place of business there or service retail clients.
- C. FCIAs do not register at the state level; they make notice filings.
- D. While exempt from state registration, FCIAs are typically subject to state notice filing requirements.
FCIA State Notice Filing
A Federal Covered Investment Adviser (FCIA) is exempt from state registration but may be required to submit a notice filing and pay a fee to states where they have a place of business or have more than 5 non-institutional clients.
- Applies to federal covered IAs.
- Exempt from state registration, but not from notice filing.
- Triggered by place of business or >5 non-institutional clients in the state.
Memory trick: Federal power, but state still wants a notice page.