A newly registered investment adviser (IA) has established its principal office in State A. The IA intends to provide advisory services to clients exclusively through its website and email, without establishing any physical offices in other states. The IA anticipates having clients in various states across the country. Under the Uniform Securities Act, how does the IA's online presence affect its state registration obligations?
- AThe IA must register in every state where it has clients, regardless of physical presence.
- BThe IA is only required to register in State A, where its principal office is located, due to the de minimis exemption.
- CThe IA must register in any state where it engages in more than five advisory clients within a 12-month period, provided it has no place of business there.
- DThe IA is considered to have a 'place of business' in any state where its website is accessible, requiring registration.
Show answer & explanationAnswer & explanation
Correct answer: C. The IA must register in any state where it engages in more than five advisory clients within a 12-month period, provided it has no place of business there.
Even with an online-only presence, an IA must register in any state where it has a 'place of business' or where it exceeds the de minimis client threshold (typically more than 5 clients) within a 12-month period, if it does not have a place of business. The website alone does not constitute a 'place of business' but client count does trigger registration.
Why the other options are wrong
- A. This is too broad; the de minimis exemption allows for a limited number of clients without registration.
- B. The de minimis exemption applies per state, meaning it still needs to consider registration in other states where it has clients.
- D. Simply having an accessible website does not constitute a 'place of business' for state registration purposes; actual client count is key.
IA State Registration (Online Presence)
An investment adviser's online presence (website, email) does not automatically establish a 'place of business' in every state. State registration obligations are triggered by having a physical 'place of business' or by exceeding the de minimis client threshold (usually 5 clients) in a given state.
- Website accessibility alone is not a 'place of business'.
- De minimis exemption applies per state for IAs without a physical office.
- More than 5 clients in a state (without a physical office) typically triggers registration.
- Principal office state always requires registration.
Memory trick: Place of business or too many web clients, state registration is due.