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.

How Does State Registration Work Under the USA?

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

How Does SEC Registration Work Under the Advisers Act?

SEC-registered advisers file Form ADV electronically through the Investment Adviser Registration Depository (IARD). Often confused: EDGAR is a separate SEC system for corporate filings such as 10-Ks and prospectuses; investment advisers use IARD for Form ADV, not EDGAR.

Key SEC registration rules:

• Federal-registration eligibility rule: Advisers with < $25M assets under management (AUM) are generally prohibited from SEC registration (must register with states)
• Registration-exception rules: Create exemptions allowing certain advisers to register with the SEC regardless of AUM

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

A mid-sized adviser ($25M-$100M AUM) normally registers with the state where its principal office is located. Two situations require SEC registration instead, and neither is optional:

• Principal office in New York: New York is the only state that does not examine or inspect its state-registered investment advisers. The mid-sized state-registration rule only applies when the home state both requires registration and would subject the adviser to examination, so a mid-sized adviser headquartered in New York must register with the SEC instead.
• Home state has no IA registration law: If the home state has no investment adviser registration statute at all, there is no state-registration mandate for the adviser to fall under, so it registers with the SEC.

A mid-sized adviser required to register in 15 or more states may instead elect SEC registration (see below); that election is the only optional path to the SEC for a mid-sized adviser.

Advisers merely eligible for SEC registration under the registration-exception rules (not required to register):

• Pension consultants with $200M+ in plan assets under advisement
• Advisers that control, are controlled by, or are under common control with an SEC-registered adviser, provided they also share the same principal office and place of business
• A newly formed/currently unregistered adviser reasonably expecting to be eligible for SEC registration within 120 days (not an existing state registrant merely anticipating future eligibility)
• Multi-state advisers (required to register in 15+ states)
• Internet advisers providing advice exclusively through interactive websites

Advisers to registered investment companies must register with the SEC regardless of AUM. "Registered investment company" is itself a complete, defined term (an issuer registered under the Investment Company Act of 1940, covering mutual 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 business development companies (BDCs) must register with the SEC once they reach $25M+ in AUM, a lower and different threshold than the mid-sized-adviser buffer, not a true "any size" rule like registered-investment-company advisers get.

Exam Tip: Gotchas

• New York is the one state name to know here. A mid-sized adviser headquartered in New York must register with the SEC, not the state, because New York does not examine state-registered IAs. This is mandatory, not elective.
• Don't confuse the "must register" categories with the "may register under an exemption" list. Registered-investment-company advisers (any AUM) and BDC advisers ($25M+ AUM) are mandatory SEC registrants; the pension-consultant, affiliated-adviser, 120-day, multi-state, and internet-adviser categories are exemptions that make an adviser merely eligible to register with the SEC. NRSROs are NOT a current exemption category, despite appearing in older materials.

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: the SEC must grant or institute denial proceedings within 45 days (not automatically effective on day 45 the way state registration is). 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 Form ADV, and What Does Each Part Contain?

Form ADV is the universal registration document for investment advisers. It has multiple parts, each serving a distinct purpose:

A Part 2B supplement is required for any supervised person who either formulates investment advice for the client and has direct client contact, or has discretionary authority over the client's assets, even without direct contact.

Discretion means deciding what to buy or sell, and how much, without the client's approval on each trade. It is not the same as physically executing a trade someone else already decided on. See Client Funds and Securities for the full definition of discretionary authority.

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.

When Must the Brochure Be Delivered?

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:

When Must State-Registered Advisers Deliver the Brochure Initially (NASAA Model Brochure-Delivery Rule)?

Delivery must occur using one of two approaches:

When Must SEC-Registered Advisers Deliver the Brochure Initially (Federal Brochure-Delivery Requirement)?

• Deliver the brochure before or at the time of entering the advisory contract
• No 48-hour advance requirement

How Do State-Registered Advisers Handle the Annual Update (NASAA Model Rule)?

• Within 120 days of fiscal year end, must either deliver an updated brochure (with a summary of material changes) to existing clients, or deliver just the summary of material changes along with an offer to provide the updated brochure on request
• No annual delivery is required at all if there have been no material changes since the last delivery

How Do SEC-Registered Advisers Handle the Annual Update (Federal Brochure Rule)?

• Within 120 days of fiscal year end, must either deliver an updated brochure (with a summary of material changes) to existing clients, or deliver just the summary of material changes along with an offer to provide the updated brochure on request
• No annual delivery is required at all if there have been no material changes since the last annual update, same as the state rule

Exam Tip: Gotchas

• The 48-hour rule applies only to state-registered advisers' initial delivery 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.
• The annual-update rule is the same shape for both regimes. State-registered and SEC-registered advisers both follow the 120-day, material-changes-only rule, and both can skip delivery entirely if nothing changed. Don't read "no changes" as still owing clients a notice.

What Are the 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 Recordkeeping Rule
• Federal rule: SEC books-and-records rule

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.

When Must an Adviser Meet Heightened Financial Requirements?

Financial reporting is governed by the NASAA Model Net-Worth and Custody Rule.

Certain advisers must meet heightened financial requirements:

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 net-worth requirement applies. But if they collect $600 six months in advance, the positive-net-worth requirement kicks in. Both the dollar amount AND the time period must be met.
• Don't merge the custody and discretion thresholds. Custody triggers the higher $35,000 minimum and an audited balance sheet; discretion without custody triggers the lower $10,000 minimum and only an unaudited balance sheet.

What Should You Check on Exam Day?

• Can you list what a state IA registration application requires (Form ADV, fees, possible exam)?
• Do you know which advisers must register with the SEC regardless of AUM, versus which ones merely qualify for an exemption?
• Can you state the effective-date rule for both state (noon, 30th day) and SEC (45th day) registration?
• Do you know what each part of Form ADV contains, and who receives Part 2A versus Part 2B?
• Can you distinguish the state 48-hour/5-day brochure-delivery options from the SEC's before-or-at-signing rule?
• Do you know the recordkeeping retention period (5 years) and how much of it must sit in the principal office (2 years)?
• Can you state the $500/6-month test that triggers a minimum net-worth requirement?