NASAA Series 66 Uniform Combined State Law ExaminationLaws, Regulations, and Guidelines, including Prohibition on Unethical Business PracticesMedium
A client, Ms. Evelyn, has been receiving advice from her investment adviser representative (IAR) in State A for five years. Ms. Evelyn recently moved to State B and plans to reside there permanently. Her IAR, who is registered in State A, has no place of business in State B and does not intend to establish one. The IAR currently advises 7 clients in State B, including Ms. Evelyn. What action, if any, is required of the IAR regarding registration in State B?
- AThe IAR can continue to advise Ms. Evelyn in State B without registration, as the relationship originated in State A.
- BThe IAR must register in State B because they exceed the de minimis client threshold for that state.
- CThe IAR must immediately register in State B, as Ms. Evelyn is now a resident there.
- DThe IAR is exempt from registration in State B due to the de minimis exemption, as long as they don't open an office.
Show answer & explanationAnswer & explanation
Correct answer: B. The IAR must register in State B because they exceed the de minimis client threshold for that state.
An IAR is generally required to register in a state if they have a place of business there, or if they advise more than a de minimis number of clients (typically 5 clients) who are residents of that state. Since the IAR advises 7 clients in State B, they exceed the de minimis exemption and must register in State B.
Why the other options are wrong
- A. The origin of the relationship does not exempt an IAR from registration requirements in a new state where the client resides and the de minimis threshold is exceeded.
- C. The trigger is the number of clients, not just one client moving.
- D. The IAR advises 7 clients, which exceeds the de minimis exemption (typically 5 clients).
IAR State Registration upon Client Relocation
An IAR must register in a state if they have a place of business there or if they advise more than a de minimis number (typically 5) of resident clients, even if relationships originated elsewhere.
- Applies to IARs, not IAs.
- De minimis exemption for 5 or fewer clients.
- Exceeding 5 clients requires registration.
Memory trick: If you're advising many, or have a spot, you're on the state's registration plot.