NASAA Series 65, Uniform Investment Adviser Law ExaminationLaws, Regulations, and Guidelines, including Prohibition on Unethical Business PracticesEasy
An investment adviser (IA) firm has 95 clients and manages $95 million in assets. All of its clients reside in a single state where the IA also maintains its sole office. The IA does NOT advise any investment companies or business development companies. Under the Uniform Securities Act and Investment Advisers Act of 1940, what is this IA's primary registration requirement?
- AIt must register with the Administrator of the state in which it has its office and clients.
- BIt is exempt from all registration requirements due to its relatively small size.
- CIt must register with both the SEC and the state Administrator.
- DIt must register with the SEC because its AUM is approaching $100 million.
Show answer & explanationAnswer & explanation
Correct answer: A. It must register with the Administrator of the state in which it has its office and clients.
Investment advisers with less than $100 million in assets under management (AUM) are generally required to register with the state Administrator in the state where they have their principal place of business, unless a specific federal exemption or trigger applies (like advising an investment company). With $95 million AUM, it falls under state registration.
Why the other options are wrong
- B. The IA is not exempt; it meets the criteria for state registration.
- C. Dual registration is typically not required unless specific conditions for both federal and state apply, which is not the case here.
- D. SEC registration is generally triggered at $100 million AUM or more, not 'approaching'.
State IA Registration Threshold
The asset under management (AUM) level that typically mandates an investment adviser to register with state securities Administrators rather than the SEC.
- AUM less than $100 million.
- Principal place of business in the state.
- No specific federal triggers (e.g., advising investment companies).
- Governed by the Uniform Securities Act.
Memory trick: Small AUM, stay local; Big AUM, go federal.