Registration and Post-Registration Requirements
With the definitions and notice filing framework in place, you can now dive into the practical mechanics of how advisers register and what obligations follow.
State Registration (USA Sections 201-204)
To register as an investment adviser at the state level, an applicant must:
- File Form ADV with the state securities administrator
- Pay required fees
- May be required to pass a qualifying examination (Series 65, or Series 66 + Series 7)
- Meet any additional state-specific requirements
Post-registration obligations include:
- Maintain books and records in compliance with state rules
- File annual amendments to Form ADV
- Comply with financial reporting requirements
- Deliver the brochure (Form ADV Part 2A) to clients
SEC Registration (IAA Sections 203, 203A)
SEC-registered advisers file Form ADV electronically through the Investment Adviser Registration Depository (IARD).
Key SEC registration rules:
- SEC Rule 203A-1: Advisers with < $25M assets under management (AUM) are generally prohibited from SEC registration (must register with states)
- SEC Rule 203A-2: Creates exemptions allowing certain advisers to register with the SEC regardless of AUM
Advisers eligible for SEC registration under Rule 203A-2:
- Pension consultants with $200M+ in plan assets under advisement
- Advisers expecting to be eligible within 120 days
- Multi-state advisers (required to register in 15+ states)
- Advisers to registered investment companies
- Internet advisers providing advice exclusively through interactive websites
Form ADV: The Registration Document
Form ADV is the universal registration document for investment advisers. It has multiple parts, each serving a distinct purpose:
| Part | Name | Contents | Filed With |
|---|---|---|---|
| Part 1 | Administrative | Organizational structure, business practices, disciplinary history, AUM | SEC or state (via IARD) |
| Part 2A | Brochure | Services, fees, investment strategies, conflicts of interest, disciplinary info, code of ethics | Delivered to clients |
| Part 2B | Brochure Supplement | Information about specific individuals providing advisory services (education, experience, disciplinary history) | Delivered to clients |
Amendment requirements:
- Annual updating amendment: Filed within 90 days of fiscal year end
- Interim amendments: Required for material changes (filed promptly)
Exam Tip: Gotchas
- The annual updating amendment is due within 90 days of fiscal year end, not calendar year end. If a firm's fiscal year ends June 30, the amendment is due by September 28, not March 31.
The Brochure Rule
The brochure rule governs when and how Form ADV Part 2A must be delivered to clients. The requirements differ slightly between state and SEC rules:
State-Registered Advisers (NASAA Model Rule 203(b)-1)
Delivery must occur using one of two approaches:
| Option | Timing | Client Right |
|---|---|---|
| Option 1 | At least 48 hours before entering the advisory contract | No cancellation right needed |
| Option 2 | At the time of entering the advisory contract | Client has the right to cancel within 5 business days without penalty |
SEC-Registered Advisers (SEC Rule 204-3)
- Deliver the brochure before or at the time of entering the advisory contract
- No 48-hour advance requirement
- Must offer to deliver an updated brochure annually to existing clients
Exam Tip: Gotchas
- The 48-hour rule applies only to state-registered advisers under the NASAA model rule. If the brochure is delivered at contract signing instead, the client gets 5 business days to cancel. The exam frequently tests which timing option triggers the cancellation right.
- "Without penalty" does not mean no charges at all. The adviser may charge a pro-rata fee for services actually rendered during those 5 business days. What they cannot charge is a setup fee or early termination penalty.
Recordkeeping Requirements
Investment advisers must maintain specified books and records as required by their regulator:
- Retention period: 5 years from the end of the fiscal year of the last entry
- Accessibility: First 2 years must be kept in the principal office (or an appropriate office)
- Electronic storage: Permitted if certain conditions are met (immutability, accessibility, backup)
- State rule: NASAA Model Rule 203(a)-2
- Federal rule: SEC Rule 204-2
Exam Tip: Gotchas
- Records are kept 5 years total, but only the first 2 must be in the principal office. The remaining 3 years can be stored off-site. The exam tests both numbers together.
Financial Reporting (NASAA Model Rule 203(c)-1)
Certain advisers must meet heightened financial requirements:
| Condition | Requirement |
|---|---|
| Adviser has custody of client funds/securities | Must maintain a minimum net worth |
| Adviser requires prepayment of fees > $500 six or more months in advance | Must maintain a minimum net worth |
| Net worth falls below required minimum | Must notify the administrator promptly |
| Required by the administrator | Must file audited financial statements |
Exam Tip: Gotchas
- The $500/6-month threshold is a common exam target. If an adviser collects $400 in advance for 8 months of service, no minimum net worth is required. But if they collect $600 six months in advance, the net worth requirement kicks in. Both the dollar amount AND the time period must be met.