11.2 Investment Adviser Registration
The National Securities Markets Improvement Act of 1996 (NSMIA) eliminated dual state and federal registration of investment advisers, establishing clear AUM-based jurisdictional boundaries.
Key NASAA Exam Takeaways
- NSMIA Division of Authority: Federal Covered Advisers register ONLY with the SEC; State Advisers register with the State Administrator.
- AUM Thresholds: Under $100M AUM = State registration; $100M to $110M AUM = Buffer zone (may choose state or SEC); $110M+ AUM = Mandatory SEC registration.
- If an SEC-registered adviser's AUM falls below $90M, it MUST withdraw from SEC registration and register with the appropriate states within 180 days.
- State Exemption (De Minimis Rule): An out-of-state adviser with NO place of business in the state can have up to 5 retail clients in a 12-month period without registering.
- Form ADV: Part 1 contains regulatory information; Part 2A (Brochure) and Part 2B (Brochure Supplement) contain plain English disclosures delivered to clients.
| Factor | Federal Covered Adviser | State-Registered Adviser |
|---|---|---|
| Regulator | SEC Only | State Administrator (in each state with presence/clients) |
| AUM Standard | $110M+ mandatory ($100M-$110M optional) | < $100M ($90M floor for SEC withdrawal) |
| State Filings | Notice Filing and fees only (no state registration) | Full State Registration via Form ADV |
| De Minimis Exemption | N/A (governed by SEC national rules) | 5 or fewer retail clients in 12 months (no place of business) |
| Books & Records Rules | SEC rules exclusively govern | State Administrator where principal office is located governs |
Knowledge Checkpoint • Section 11.2
A state-registered investment adviser's Assets Under Management (AUM) reach $115 million on December 31. By when must the adviser register with the SEC?