Frequently Asked Questions

Who must register as an investment advisor?
Section 202 of the Investment Advisers Act of 1940 defines an Investment Adviser as any person or firm that, for compensation, (1) engages in the business of advising others, either directly or through publications or writings, as to the value of securities or as to the advisability of investing in, purchasing, or selling securities or (2) that, for compensation and as part of a regular business, provides analysis concerning securities. There are certain exclusions from the definition, which mostly exclude individuals and firms that provide only incidental advice.

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Should I file with the SEC or the state(s)?
Generally, advisors are eligible (and required) to file with the SEC in lieu of filings with the state(s) if their assets under management exceed $30 million or they serve as an advisor to investment company assets (i.e., mutual fund advisor). An advisor with greater than $25 million but less than $30 million has the option to register with the SEC.

If a firm currently has less than $25 million, but expects to have assets exceeding that level within 120 days, the advisor may register with the SEC instead of the state(s). However, if the advisor fails to meet the $25 million threshold, the advisor must file a withdrawal from SEC registration and re-register separately with the state(s).

There are some exemptions that enable advisors with less than $25 million to file with the SEC, including:

• Firms serving as advisor to registered investment companies ("RICS" or commonly "mutual funds")
• Firms with clients in 30 or more states
• Firms serving as a pension consultant providing only advice to plans with assets greater than $50 million (not managing assets)
• Firms providing investment advice solely via the Internet

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How long does the registration process take?
The registration process, including entitlement and Form ADV filing, generally will take between six and eight weeks, depending on the complexity of your firm and the backlog on the IARD system for the various regulatory agencies. The agencies typically take 45 days to approve or decline and application.

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What is Form ADV?
Form ADV is the official for advisor registration with the SEC or the state regulators. Form ADV serves two primary functions. ADV Part 1 is the the investment advisor registration document and ADV Part II, also know as the "brochure" is the disclosure document that must be provided to clients prior to entering into an advisory agreement.

Form ADV Part 1 is filed electronically through the IARD system. Firms registering with the SEC must complete Part 1A and firms registering with the state(s) must file Part 1A and Part 1B.

Form ADV Part II, along with Schedule F serves as the disclosure document provided to clients and filed with the regulators. Form ADV Part II and Schedule F must also be offered to existing clients on an annual basis. A firm may opt to develop a formatted marketing brochure instead of Form ADV Part II. This approach is acceptable, provided that the marketing brochure contains all of the required information in Form ADV Part II an supporting schedules.