Does Your Investment Advisory Firm Need to Register with the SEC?

July 01, 2005

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There are several criteria that qualify your firm for registration with the SEC as an investment advisor. For example, if your firm is registered with 30 or more states, you should rely on the multi-state rule and register with the SEC. If you are located in Wyoming, your firm must register with the SEC because the State of Wyoming does not regulate advisors. Investment advisors to investment companies must register with the SEC as well. To see a full listing of the SEC registration criteria, simply refer to your Form ADV Part 1. Item 2 details the different SEC registration criteria.

(Regardless of whether your firm is required to be registered with the SEC, all individuals serving as investment advisor representatives still must be registered with the applicable state regulators.)

By far, the most common determination for SEC registration is an advisor firm’s assets under management (AUM). Rule 203A-1 of the Investment Advisors Act of 1940 states that all advisor firms with AUM over $30 million must be registered with the SEC. Firms with AUM below $25 million must register directly with state regulators (excluding Wyoming, of course). Regulators do provide a “buffer zone” so advisor firms can choose between the two sets of regulatory bodies when their AUM falls between $25 and $30 million.

Calculating your advisor firm’s AUM can be complicated. While the ADV Part 1 does give instructions on how to calculate AUM, it can still be confusing. This is especially true when a firm has relationships with sub-advisors and/or third party money managers.

If your firm has questions on how to calculate its AUM or other questions about registering with the SEC or a particular state, please contact us. We can provide guidance on AUM calculations and help your firm meet the supervisory requirements expected of all SEC registered investment advisors.

Posted by Bryan Hill
Labels: How to Become RIA, Investment Advisor Registration, Registration