An investment adviser representative (IAR) for a federal covered investment adviser (FCIA) has established a new office in State Z. The FCIA's principal office is in State X. The IAR will be primarily servicing clients who reside in State Z. Under the Uniform Securities Act (USA), what, if any, registration action is required for the IAR in State Z?
- AThe IAR must register in State Z because they have a place of business in that state.
- BThe IAR must register in State Z only if they service more than 5 clients in that state.
- CThe IAR must register in State Z, and the FCIA must also undergo full state registration in State Z.
- DNo registration is required for the IAR in State Z, as the FCIA is registered with the SEC.
Show answer & explanationAnswer & explanation
Correct answer: A. The IAR must register in State Z because they have a place of business in that state.
While federal covered investment advisers (FCIAs) are generally exempt from state registration (only notice filing is required), their investment adviser representatives (IARs) are still subject to state registration requirements. An IAR must register in any state where they have a place of business, regardless of the number of clients serviced from that office or whether their firm is federal covered or state-registered. The 'place of business' rule trumps de minimis exemptions for IARs.
Why the other options are wrong
- B. The de minimis exemption (fewer than 6 clients) applies to IAs without a place of business in a state. For an IAR with a place of business, registration is required, regardless of the client count.
- C. The FCIA would typically only be required to make a notice filing in State Z, not undergo full state registration, as it is federal covered.
- D. This is incorrect. While the FCIA may be exempt from state registration, the IAR is not automatically exempt if they have a place of business in a state.
IAR Registration for FCIA Representatives
Investment Adviser Representatives (IARs) of Federal Covered Investment Advisers (FCIAs) must register in any state where they have a place of business, even though their firm is registered with the SEC.
- FCIA IARs register at the state level.
- Registration required in any state with a 'place of business'.
- De minimis exemption does not apply if a place of business exists.
Memory trick: Federal Firm, State IAR, If Office Is There.