Quick Answer
An investment adviser meets the three-part test: advice, in the business, compensation. Assets under management split registration:
Quick Answer: An investment adviser meets the three-part test: advice, in the business, compensation. Assets under management split registration: $110 million and up registers with the SEC as federal covered, and $25 million to under $100 million generally registers with the state. Federal covered advisers only notice file. Exempt reporting advisers still file abbreviated reports.
10 million and up registers with the SEC as federal covered, and $25 million to underQuick Answer: An investment adviser meets the three-part test: advice, in the business, compensation. Assets under management split registration: $110 million and up registers with the SEC as federal covered, and $25 million to under $100 million generally registers with the state. Federal covered advisers only notice file. Exempt reporting advisers still file abbreviated reports.
00 million generally registers with the state. Federal covered advisers only notice file. Exempt reporting advisers still file abbreviated reports.One sheet: who counts as an adviser, where they register, notice filing, post-registration duties, exempt reporters, and IAR supervision.
Which One-Liners Win Points?
- The three-part test (ABC) must be met fully: Advice about securities, in the Business (regular, need not be primary), Compensation (any economic benefit, direct or indirect).
- "Compensation" is read broadly: a referral fee for steering clients to products counts, not just a direct advisory fee.
- Banks, savings institutions, and trust companies are excluded, but their subsidiaries and affiliates are NOT.
- Registered-investment-company advisers MUST register with the SEC regardless of AUM (no minimum); BDC advisers MUST register once at $25M+ AUM. Pension consultants, affiliated advisers, 120-day-eligibility advisers, multi-state advisers, and internet advisers are merely ELIGIBLE to register with the SEC regardless of AUM. NRSROs are NOT a current SEC-registration category.
Which Numbers Matter Most?
| Item | Value |
|---|---|
| SEC registration mandatory | $110M-plus AUM |
| SEC registration optional buffer | $100M to under $110M AUM (may register with the SEC) |
| State-registration zone | $25M to $100M AUM (generally state) |
| Below this, state registration required | Below $25M AUM |
| Mandatory SEC fallback in $25M-under-$100M zone | Home state skips IA registration or exams (MUST, not may, register with SEC) |
| The one state name to know for that fallback | New York: doesn't examine state-registered IAs, so its mid-sized advisers must register with the SEC |
| SEC withdrawal floor | Below $90M AUM before withdrawing to state registration |
| Multi-state adviser SEC eligibility | required to register in 15-plus states |
| Pension consultant SEC eligibility | $200M-plus in plan assets |
| SEC eligibility "expecting to qualify" (new/unregistered adviser only) | within 120 days |
| Private fund adviser ERA threshold | less than $150 million AUM in the U.S. |
| Venture capital fund adviser threshold | no AUM threshold (exempt at any size) |
| ERA initial filing | within 60 days of claiming the exemption |
| State IA registration effective | noon on the 30th day after filing |
| SEC IA registration | granted or denial proceedings instituted within 45 days (not automatic) |
| Annual updating amendment | within 90 days of fiscal year end |
| Recordkeeping retention | 5 years total, first 2 years in the principal office, remaining 3 off-site |
Who Counts as an Investment Adviser?
- Advice covers recommendations, reports, and analyses, not just buy/sell calls.
- "In the business" means ongoing, not necessarily the primary occupation (a CPA advising on securities as part of planning still qualifies).
What Is Notice Filing, and What Is It Not?
- There is no single national notice filing: each state may set its own fee and filing.
How Does an Adviser Register and Stay Registered?
- Form ADV parts: Part 1 administrative (via IARD); Part 2A the brochure (services, fees, conflicts); Part 2B the brochure supplement (individual providers).
- Both effective dates are outer limits, not waiting periods. Either regulator may grant or deny registration before the 30-day or 45-day mark runs out.
- Post-registration: keep books and records, file annual amendments, meet financial reporting, deliver the brochure.
- Financial responsibility: custody needs $35,000 net worth (audited balance sheet); discretion alone needs $10,000 (unaudited); collecting over $500 six-plus months ahead needs positive net worth (audited). Custody from only fee deduction or only pooled-vehicle advising skips the $35,000 floor, the most tested exception.
- If net worth falls short, the financial-condition report must show a trial balance, unsegregated client funds, aggregate client debit balances, and the number of accounts.
Who Files as an Exempt Reporting Adviser?
- ERA is a middle ground: too small or specialized for full registration, too significant for no oversight.
- 3(c)(1) and 3(c)(7) are Investment Company Act exclusions defining what counts as a private fund; they are fund-level exclusions, not adviser-specific rules.
How Must an Adviser Supervise Its Representatives?
- Written procedures must be both adopted AND implemented, not just filed in a drawer; a designated chief compliance officer and at least annual review are required, with minimum categories including proxy voting, cybersecurity/privacy, code of ethics, and business continuity/succession.
Which Gotchas Trip Students Up?
- Don't equate the $100M-$110M buffer with the $25M-$100M exception. The buffer is MAY-register; the home-state exception below it (no IA registration or exam) is MUST-register with the SEC.
- A subscription fee doesn't defeat the publisher exclusion. The test is whether advice is tailored to the reader, not whether they pay.
Which Memory Aids Are Worth Keeping?
- LATE for the incidental-professional exclusion: Lawyers, Accountants, Teachers, Engineers.
One-Breath Recap
An investment adviser is anyone who, for compensation, is in the business of advising on securities, unless an exclusion fits, such as professionals whose advice is solely incidental or a bank itself, never its subsidiary. Assets under management draw the line: $110 million and up goes to the SEC, and $25 million to under $100 million generally registers with the state. Federal covered advisers only notice file where they have a place of business or more than 5 non-institutional clients; states keep antifraud power everywhere. State registration is effective at noon on the 30th day, while the SEC must grant or institute denial proceedings within 45 days. Form ADV Part 2A is the client brochure, and the annual update does not split by regime: both run 120 days after fiscal year-end and owe nothing when nothing material changed.
Need more than the recap? Read the full Investment Adviser Regulation unit.