Registration and Post-Registration

This section works through the AUM thresholds and switching deadlines, exempt reporting advisers, books-and-records rules, ongoing Form ADV and brochure obligations, continuing education, and the financial requirements a state may impose.

What AUM Thresholds Separate State and SEC Registration?

Federal AUM thresholds divide investment adviser (IA) regulation between the SEC and state administrators:

The $90 million/$110 million buffer prevents advisers from constantly switching between state and SEC registration due to small AUM fluctuations. You must register with the SEC at $110M but only must de-register at $90M.

Which Mid-Size Advisers Register With the SEC Instead of the State?

A mid-size adviser ($25 million-$100 million AUM) normally registers with the state where its principal office is located. Two named situations move that adviser to the SEC instead, and neither is optional:

Exam Tip: Gotchas

• New York is the one state name to know here. If a mid-size adviser's principal office is in New York, the answer is SEC, not the state, because New York does not examine state-registered IAs.
• This is mandatory, not elective. Only the 15-or-more-states rule below is a choice. New York and no-state-law are fixed triggers, just like the AUM-based rows above.

What Are the Deadlines for Switching Between State and SEC Registration?

Which Advisers Register With the SEC Regardless of AUM?

Certain IAs register with the SEC regardless of the general AUM ladder:

• Advisers to registered investment companies, with no AUM floor at all. "Registered investment company" is itself a complete, defined term: an issuer registered under the Investment Company Act of 1940, which includes mutual funds (open-end funds), closed-end funds, and unit investment trusts. A question does not need to name the fund structure for this rule to apply
• Advisers to a business development company (BDC) that has elected BDC status and not withdrawn it, once the adviser has at least $25 million in regulatory AUM
• Internet advisers providing advice to all of their clients exclusively through an operational interactive website, at all times while relying on the exemption
• Pension consultants with $200+ million in plan assets under advisement (the floor is on the plan assets advised, not the adviser's own AUM)
• Advisers under common control with an SEC-registered adviser, provided both share the same principal office and place of business. Control means holding 25% or more of the voting rights, or entitlement to 25% or more of the profits. No time limit attaches to this category.
• Advisers not yet registered anywhere that reasonably expect to become eligible for SEC registration within 120 days, on an undertaking to withdraw if they do not

Note: Multi-State Registration Is an Election, Not a Mandate

Everything above is a fixed, no-choice trigger for SEC registration. A multi-state adviser required to register in 15 or more states works differently: SEC registration is an election, not a requirement. The adviser may register with the SEC instead of registering with each state, or it may stay state-registered. This is the only path to the SEC on this page that the adviser gets to choose.

Electing this path still comes with an undertaking, not a free pass. On Schedule D of Form ADV, the adviser must agree to withdraw from SEC registration via Form ADV-W within 180 days of its fiscal year end if a later annual updating amendment shows it would be required to register in fewer than 15 states, and it is otherwise prohibited from SEC registration.

Exam Tip: Gotchas

• Registered investment company advisory contract = federal covered, period. Even an adviser with $10M AUM must register with the SEC if it advises a registered investment company. The stem naming "a registered investment company" is already enough; it does not need to specify mutual fund, closed-end fund, or any other structure.
• BDC advisers have their own floor: $25 million. Don't confuse this with the registered-investment-company adviser row above (no floor at all) or the pension consultant row (whose $200 million threshold measures plan assets, not the adviser's own AUM). Below $25 million, a BDC adviser is not eligible for this route and follows the standard AUM ladder instead.
• Multi-state (15+ states) is the one election here. Every other path to SEC registration on this page is mandatory. Don't read the multi-state "may" language as applying anywhere else.
• The thresholds are asymmetric. Must register with SEC at $110M but only must de-register at $90M. The buffer prevents constant switching.
• The common-control category has no deadline. Unlike the other rows in this list, it is not tied to a 90-day, 120-day, or 180-day clock.

Does Client Count or Office Count Change Who an Adviser Registers With?

Once an adviser is federal covered, it registers with the SEC only, no matter how many clients it has or how many states it has offices in. That outcome is fixed by AUM and adviser category, not by the adviser's preference and not by how many clients happen to fall in any one state.

States still have a role, but a narrower one: they can require a federal covered adviser to notice file (not register) in a state where the adviser has a place of business, or 6 or more clients who are residents of that state in a 12-month period. See Notice Filing Requirements for the full mechanics.

Exam Tip: Gotchas

• The client-count and office-count thresholds decide whether a notice filing is owed in a given state, not who the adviser's registrant is. A federal covered adviser with 50 clients spread across 10 states still registers with the SEC only. The 6-or-more-clients test just answers a separate question: which of those states can also collect a notice filing and fee.
• Don't confuse this with the de minimis exemption from state registration (5 or fewer retail clients AND no office in the state, see Definitions of Investment Advisers). That test applies to a small adviser before it is registered anywhere. This one only applies after the adviser is already SEC-registered, and uses OR instead of AND.

When Does IA Registration Become Effective?

The effective date for IA registration differs depending on whether registration is at the state or federal level:

Exam Tip: Gotchas

• State registration = noon on the 30th day. SEC registration = 45th day. The exam tests this distinction directly.
• Both agencies can grant earlier effectiveness or deny the application before the deadline. The date marks the outer limit, not a required wait.

What Is an Exempt Reporting Adviser?

ERAs are investment advisers exempt from full SEC registration but required to file Form ADV with abbreviated sections.

What Are the Two ERA Categories?

What Rules Still Apply to an ERA?

• ERAs must file Form ADV (abbreviated sections) and report annually
• ERAs are still subject to SEC antifraud provisions
• States may require ERAs to register or notice file at the state level

Exam Tip: Gotchas

• Venture capital ERA has no AUM cap. Private fund ERA caps at $150M. Do not mix these up.
• ERAs still file Form ADV and are still subject to SEC antifraud provisions. "Exempt from registration" does not mean "exempt from oversight."

What Books and Records Must an IA Maintain?

Which Records Must an IA Keep?

• Cash receipts and disbursements journal
• General and auxiliary ledgers
• Order memoranda: Purchase/sale orders, client instructions
• Bank records: Statements, canceled checks
• Written communications: Relating to advice and recommendations
• Discretionary account records and powers of attorney
• Written advisory agreements (client contracts)
• Advertising file: All advertisements, performance calculations, marketing materials. A communication becomes "advertising" for this rule once it goes, directly or indirectly, to two or more persons (more than one person). A one-on-one communication to a single client is not advertising and does not trigger this file
• Personal securities transaction records for the IA and all investment adviser representatives (IARs)
• Solicitor records: Written agreements with solicitors, disclosure documents
• Compliance records: Code of ethics, compliance policies, trade blotters

How Long Must Records Be Retained?

Exam Tip: Gotchas

• 5-year retention for IAs. This differs from the 3-year period for broker-dealers. The exam specifically tests this distinction.
• The 5-year rule starts from end of fiscal year, not from the date of creation.
• Organizational records follow a different clock entirely. Partnership articles, articles of incorporation, charters, minute books, and stock certificate books are not on the 5-year cycle. They stay at the principal office for as long as the firm exists, then must be preserved at least 3 years after the firm terminates.

What Ongoing Filings Keep a Registration Current?

When Does a State-Registered IA's Registration Expire?

Under the Uniform Securities Act, a state investment adviser registration is never permanent. It expires every December 31 unless renewed, no matter when during the year the adviser first registered. This is a fixed calendar date, not a one-year anniversary of the original effective date.

What Are the Parts of Form ADV?

All filings are made through the IARD (Investment Adviser Registration Depository).

When Must the Brochure Be Delivered?

The two regimes diverged in 2010, and the exam tests the state one.

De minimis delivery exemption: Neither timing rule applies to a client who receives only impersonal advice and pays less than $500 per year in fees. No brochure delivery is owed to that client at all.

When Must the Brochure Supplement Be Delivered?

• Part 2B brochure supplement must be delivered before or at the time a supervised person begins providing advice to a client

What Is Required for Annual Brochure Delivery?

The annual delivery obligation is triggered only by material changes. If no material changes occurred since the last delivery, the adviser owes clients nothing: no updated brochure, no summary, no notice.

If material changes did occur, within 120 days of fiscal year end the adviser must deliver either:

• Updated brochure (which includes or is accompanied by a summary of the material changes), or
• Summary of material changes with an offer to provide the full brochure on request

When Must Form ADV Be Updated?

What Financial Reporting Do State-Registered Advisers File?

State-registered advisers may be required to file a balance sheet with the state administrator:

The balance sheet must be filed with the state administrator within 90 days after the end of the adviser's fiscal year.

The $500 figure is the state threshold, not the federal one. Under Form ADV Part 2A, Item 18, a federal covered (SEC-registered) adviser only triggers the balance-sheet and financial-condition disclosure requirement at a higher dollar amount: prepayment of advisory fees of more than $1,200 per client, six months or more in advance. The same six-month period applies at both levels; only the dollar figure changes, and it drops to more than $500 per client for state-registered advisers.

Exam Tip: Gotchas

• Discretion alone still requires a balance sheet, just not an audited one. The question is never whether an adviser with discretion files, it is which tier applies. Custody moves the adviser up to the audited tier, and a large prepaid-fee arrangement (six months or more in advance, over $500 per client) triggers that same audited requirement. An adviser files nothing under this rule only when it has no custody, no discretion, and no substantial prepayment.
• This 90-day balance-sheet deadline is separate from the 90-day annual Form ADV update deadline. Same number, two different filings.
• State threshold is $500. Federal threshold is $1,200. Both use the same six-months-or-more-in-advance window; only the dollar amount changes between state-registered and federal covered advisers. Do not swap the two figures.

What Continuing Education Must IARs Complete?

IARs in adopting states must complete 12 credits annually:

Key continuing education (CE) rules:

• Credits cannot be interchanged between the two categories
• Professional designation CE (CFP, CFA, ChFC, CIMA, PFS) may count if courses meet content standards
• Failure to complete CE by year-end results in CE Inactive status. The IAR may continue advisory business while completing the missing CE, and becomes ineligible to register or renew only if still CE Inactive at the close of the next calendar year

Exam Tip: Gotchas

• Annual ADV amendment = 90 days. Annual brochure delivery to clients = 120 days. Different deadlines for different purposes. Do not confuse them.
• Brochure delivery differs by adviser type. State-registered advisers get an either/or: 48 hours in advance OR at signing with a 5-business-day cancellation right. Federal covered advisers do NOT get the 48-hour option; they must deliver before or at the time of signing.
• CE credits are split 6/6 and cannot be swapped. 12 credits of ethics but zero products credits does NOT satisfy the requirement.
• There is also a floor inside the ethics category. It is "Regulatory and Ethics" content, and at least 3 of its 6 credits must specifically cover ethics. Six credits of general regulatory material alone does not satisfy it.

What Net Worth or Bonding Requirements Apply to IAs?

States may require IAs to maintain minimum net worth or post a surety bond, especially if the IA has custody of client assets or discretion over client accounts:

How Is the Surety Bond Amount Calculated?

An IA that falls short of its required minimum net worth can stay compliant by posting a surety bond instead. The bond amount is not simply the shortfall:

1. Calculate the deficiency: required minimum net worth minus actual net worth.
2. Round the deficiency up to the nearest $5,000. That rounded figure is the bond amount.

Example: An IA with custody (required minimum: $35,000) has an actual net worth of $22,000. The deficiency is $35,000 - $22,000 = $13,000. Rounded up to the nearest $5,000, the required bond is $15,000, not the raw $13,000 deficiency.

Exam Tip: Gotchas

• Custody = $35,000. Discretion = $10,000. The exam loves testing these thresholds paired with the specific condition that triggers each.
• Substantial prepayment is a third, independent trigger. An IA that accepts more than $500 per client, six months or more in advance, must maintain a positive net worth even if it has neither custody nor discretion. "No minimum net worth requirement" is only true when all three triggers (custody, discretion, and substantial prepayment) are absent.
• The bond is the deficiency rounded UP to the nearest $5,000, not the raw deficiency. A $13,000 shortfall requires a $15,000 bond, not a $13,000 bond. This rounding step is the exam's favorite trap.

What Should You Check on Exam Day?

• Know the AUM breakpoints: under $25M is state-only, $25M-$100M is the mid-size band, $110M and above is mandatory SEC registration.
• Remember the two named mid-size exceptions: a principal office in New York (the only state that doesn't examine state-registered IAs), and a home state with no IA registration law at all. Both are mandatory SEC registration, not elections.
• Remember the $90 million/$110 million buffer and its asymmetric deadlines: 90 days up to the SEC, 180 days back down to the state.
• Remember the 15-or-more-states election also carries a 180-day withdrawal undertaking: if a later annual updating amendment shows fewer than 15 states, the adviser must withdraw via Form ADV-W within 180 days of its fiscal year end.
• Remember advisers to registered investment companies (mutual funds, closed-end funds, unit investment trusts), BDC advisers with $25M or more AUM, internet advisers, large pension consultants, and common-control affiliates of an SEC-registered adviser register with the SEC regardless of the general AUM ladder.
• Know the two ERA categories and their AUM caps: no cap for venture capital fund advisers, under $150 million for private fund advisers.
• Remember a state IA registration expires every December 31 unless renewed, a fixed calendar date rather than an anniversary of the original registration.
• Remember state registration becomes effective at noon on the 30th day after filing; SEC registration on the 45th day.
• Remember the 5-year records retention period, with the first 2 years kept at the principal office. Organizational records (articles of incorporation, minute books, stock certificate books) are on a different clock: kept for the life of the enterprise, preserved at least 3 years after termination.
• Know the advertising-file threshold: a communication is "advertising" once it reaches two or more persons (more than one person). A single client communication does not count.
• Know the brochure delivery choices: state-registered advisers get 48 hours before signing, or at signing with a 5-business-day cancellation right; federal covered advisers only get before-or-at-signing, with no 48-hour option.
• Remember the 90-day annual Form ADV update deadline is separate from the 120-day annual brochure delivery deadline.
• Know the net worth thresholds: $35,000 for custody, $10,000 for discretion without custody, and that a surety bond can substitute for either. A third trigger, independent of custody and discretion, requires only a positive net worth: accepting more than $500 per client, six months or more in advance, in prepaid fees.
• Remember the surety bond amount is the net worth deficiency rounded up to the nearest $5,000.
• Remember the balance-sheet filing trigger (custody, or six-plus-months prepaid fees over $500 per client for state-registered advisers, over $1,200 per client for federal covered advisers) and its own 90-day filing deadline.
• Know the CE requirement: 12 credits a year split 6/6 between the two categories, with at least 3 of the ethics-category credits actually covering ethics.