Introduction

Welcome to Investment Adviser Regulation, the unit that explains who qualifies as an investment adviser under state law, how they register, and what distinguishes state-registered advisers from federal covered advisers.

Exam Weight: 5% (approximately 3 questions)

What You'll Learn

In this unit, you'll cover:

• Definition of "Investment Adviser": The three-part ABC test and how compensation is broadly interpreted
• Exclusions from the Investment Adviser (IA) Definition: Seven categories of persons excluded, including professionals and broker-dealers
• Registration Requirements: State registration procedure, Form ADV, exemptions for out-of-state advisers
• State vs. Federal Registration: Assets under management (AUM) thresholds that determine whether an IA registers with the state or SEC
• Financial Requirements and Bonding: When the Administrator can require minimum net worth or a surety bond
• Post-Registration Requirements: Books and records, client disclosure, and regulatory examinations
• Denial, Revocation, and Withdrawal: Grounds for administrative action and procedural protections
• NASAA Model Rules: Key model rules tested in connection with IA regulation

Why This Matters

Investment adviser regulation is a core Series 63 topic. The exam tests your ability to:

• Distinguish who is and who is not an investment adviser
• Understand when state registration is required versus federal registration
• Recognize the Administrator's powers over advisers operating in the state

These concepts overlap with broker-dealer and agent regulation you studied in earlier units, but IA regulation has its own unique rules: the ABC test, the "solely incidental" standard, and the state/federal dividing line are all distinct from what you've seen before.

Let's start with the definition of "investment adviser" and the ABC test.