NASAA Series 66 Uniform Combined State Law ExaminationLaws, Regulations, and Guidelines, including Prohibition on Unethical Business PracticesEasy
An investment adviser (IA) registered in State A has 30 clients. 25 of these clients reside in State A, and the remaining 5 clients reside in State B. The IA has no office in State B and does not advertise there. Under the Uniform Securities Act, must this IA register in State B?
- AYes, because the IA has clients residing in State B, regardless of number.
- BNo, because the IA has fewer than 6 clients in State B, qualifying for the de minimis exemption.
- CNo, because the IA does not have a physical office or advertise in State B.
- DYes, because the IA's principal office is in State A, requiring registration in all states where clients reside.
Show answer & explanationAnswer & explanation
Correct answer: B. No, because the IA has fewer than 6 clients in State B, qualifying for the de minimis exemption.
The de minimis exemption under the Uniform Securities Act (USA) allows an investment adviser to avoid registration in a state if they have no place of business in that state and fewer than 6 clients who are residents of that state. Since the IA has only 5 clients in State B, they qualify for this exemption.
Why the other options are wrong
- A. The number of clients is a crucial factor for state registration requirements under the de minimis exemption.
- C. While not having a physical office or advertising is relevant, the de minimis exemption specifically focuses on the client count.
- D. The location of the principal office does not automatically require registration in all states with clients; de minimis exemptions can apply.
IA State De Minimis Exemption
An exemption from state registration for an investment adviser who has no place of business in that state and fewer than 6 clients who are residents of that state.
- Applies to state-registered IAs.
- No physical office in the 'other' state.
- Fewer than 6 clients in the 'other' state.
Memory trick: No home, few friends, no need to sign in.