A state-registered investment adviser (IA) is preparing to open for business. As part of its initial registration, the IA must file specific documents and information with the state administrator. Which of the following is typically NOT a requirement for initial state registration?
- APosting a surety bond if the IA exercises discretion or has custody.
- BProviding a copy of the firm's most recent internal compliance audit report.
- CFiling Form ADV Part 1 and Part 2.
- DSubmitting audited financial statements if the IA maintains custody.
Show answer & explanationAnswer & explanation
Correct answer: B. Providing a copy of the firm's most recent internal compliance audit report.
While internal compliance audits are a crucial part of an IA's ongoing operations and supervision, submitting a copy of the firm's *most recent internal compliance audit report* is typically not an initial registration requirement. Initial requirements focus on the firm's structure, policies, key personnel, and financial solvency, such as Form ADV, financial statements, and surety bonds.
Why the other options are wrong
- A. Surety bonds are commonly required for IAs that exercise discretion or have custody, to protect clients.
- C. Form ADV (Parts 1 and 2) is the primary registration document for both state and federal IAs.
- D. Audited financial statements are often required for IAs that maintain custody of client assets, as part of initial registration.
IA Initial State Registration Requirements
Initial state registration for an Investment Adviser typically involves filing Form ADV, providing financial statements (especially if having custody), and posting a surety bond if exercising discretion or maintaining custody. Ongoing internal audit reports are not initial requirements.
- Form ADV is central to initial registration.
- Financial statements and surety bonds depend on custody/discretion.
- Internal audit reports are for ongoing compliance, not initial filing.
Memory trick: Form ADV, financials, bond, but internal audits, not beyond!