The Investment Advisers Act and state securities laws apply once you meet a compensation-for-advice test, regardless of your firm's size or where it's incorporated. State regulators alone oversee 16,575 advisers managing $100 million or less, which shows this isn't a big-firm-only concern.
This guide covers who must register, whether the SEC or a state regulator has jurisdiction, which exemptions might apply, and what registration and ongoing compliance actually involve in 2025. This is educational content, not legal advice. Consult qualified US securities counsel before making registration decisions.
Key Takeaways
- Your firm, not just the individual giving advice, must determine its adviser status and applicable regulator.
- SEC and state registration are separate tracks; a firm can hold one while its representatives handle the other.
- RAUM, client types, private fund activity, and business location determine SEC versus state registration.
- Confirm 2025 thresholds, forms, and fees directly with the SEC, NASAA, IARD, or your state before filing.
Who Must Register as an Investment Adviser?
The Legal Definition
Under the Investment Advisers Act of 1940, an investment adviser is anyone who, for compensation, advises others about the value of securities or the advisability of buying or selling them, or issues securities analyses as a regular part of business. State securities laws mirror this framework with only minor variations.
Three elements typically need to be present:
- You provide advice, analysis, recommendations, or reports about securities
- You receive compensation, in any form
- You conduct this as a business, not as an isolated favor
Compensation is broader than most people assume. It doesn't need to be a stated advisory fee. Commissions, a portion of assets under management, flat retainers, or even non-cash economic benefits can all count, regardless of who actually pays you.
Firm vs. Individual: Two Different Obligations
An "investment adviser" is the firm itself: the LLC, corporation, or partnership offering the advice. An "investment adviser representative" (IAR) is the individual (employee, partner, or officer) who actually delivers advice or solicits clients on the firm's behalf.
This distinction matters because registration requirements apply differently. The firm registers with the Securities and Exchange Commission (SEC), a state, or both. Individual IARs often need separate state-level qualification or registration on top of that.
What Doesn't Count as Investment Advice
General accounting, tax preparation, and business consulting aren't securities advice on their own. Real estate, commodities, and precious metals discussions also fall outside the definition.
The line blurs fast. If you market tax-planning services alongside specific stock recommendations, you may have crossed into adviser territory regardless of how you label the service.
Quick self-assessment:
- Do you discuss specific securities, not just asset classes?
- Do you receive compensation tied to this advice?
- Do you have discretionary authority over client accounts?
- Where is your principal office, and where do your clients live?
- In how many states do you actively serve clients?
If you answered yes to the first two, you likely need to determine your regulator next.
SEC Versus State Registration: Which Regulator Applies?
Once you've confirmed you're an investment adviser, the next question is who regulates you. The answer hinges mainly on regulatory assets under management (RAUM).
RAUM Thresholds in 2025
| RAUM | Regulator |
|---|---|
| Below $100 million | Generally state-registered, subject to exceptions |
| $100 million to under $110 million | SEC registration optional under Rule 203A-1 |
| $110 million or more | SEC registration generally required |
| Required to register in 15+ states | Eligible to register with the SEC instead, under Rule 203A-2(d) |
An adviser already SEC-registered typically doesn't need to withdraw until RAUM drops below $90 million. These figures shift periodically, so confirm current numbers on the SEC's site before filing anything.
Federally Covered Doesn't Mean State-Free
SEC registration makes a firm "federally covered," but states still retain authority over:
- Notice filings and associated fees
- IAR registration for representatives with a place of business in that state
- Antifraud enforcement
Special categories, including advisers to registered investment companies, certain pension consultants, and internet-only advisers, have their own eligibility rules. Verify current statutory definitions before assuming you qualify for any of these.
Texas: A Closer Look
Texas illustrates how state-specific rules add another layer. The Texas State Securities Board generally requires:
- Form ADV Parts 1A, 1B, and 2 filed through IARD
- Form U4 for the firm's designated officer and each IAR
- Initial fees around $75 per firm and $35 per IAR (lower renewal fees)
- Series 65 for IARs, or Series 66 combined with other qualifications
Texas also offers limited relief from state registration, including:
- Advisers with no more than five Texas-resident clients in the prior 12 months
- Advice given solely to certain institutional investors
Check the Texas Securities Board's current rulebook before relying on any of these thresholds.
When Can an Adviser Avoid Full SEC or State Registration?
Not registering doesn't always mean you're off the hook entirely. Some advisers qualify as exempt reporting advisers (ERAs) and skip full registration but still file portions of Form ADV. Others fall outside the adviser definition altogether. The distinction matters.
Private Fund Adviser Exemption
A US-based adviser qualifies here if it advises solely qualifying private funds and manages less than $150 million in private fund assets. Non-US advisers face a similar $150 million test, measured at their US place of business.
Using this exemption makes you an ERA. You'll still need to file specified Form ADV Part 1A items via IARD, though you skip the Part 2 brochure requirement. Accepting a separately managed account or a non-qualifying client can disqualify you from this exemption entirely.
Foreign Private Adviser Exemption
This applies only to advisers with no US place of business. Conditions include:
- Fewer than 15 US clients plus US investors in your private funds
- Less than $25 million in assets attributable to those US clients and investors
- No public holding-out as an adviser within the United States
- No advisory relationship with a registered fund or business development company
Miss any single condition, and the exemption disappears.
Other Notable Carve-Outs
Several other paths sit beside the two main exemptions:
- Venture capital fund advisers that advise solely qualifying VC funds can file as ERAs
- Family offices serving only family clients are excluded from the adviser definition entirely
- SBIC advisers managing solely qualifying small business investment companies have a federal exemption
- Commodity trading advisers may face overlapping CFTC rules worth checking separately
A federal exemption doesn't clear state obligations automatically. Texas, for instance, runs its own private fund exemption with separate conditions and a distinct reporting pathway from the federal $150 million test.
Qualifying federally doesn't guarantee you've cleared every state filing, disclosure, or IAR-licensing requirement. Check each state where you have clients or a place of business.
How to Register an Investment Adviser in 2025
Registration follows a fairly linear process, though details shift depending on whether you're filing with the SEC, a state, or both.
The Core Steps
- Determine your regulatory status - Confirm you meet the adviser definition and calculate RAUM.
- Select your regulator(s) - SEC, one or more states, or both through notice filing.
- Establish your legal entity - Finalise ownership structure and formation documents.
- Create an IARD account - This is the electronic system used for all adviser filings.
- Prepare Form ADV and identify jurisdictions - Map every state where IAR registration applies.
Form ADV: What Each Part Covers
Part 1A covers:
- Ownership and control
- Business activities and client types
- Assets under management
- Disciplinary history
- Custody arrangements and affiliations
Use the SEC's current form and instructions, since this section gets revised periodically.
Part 2A is your firm brochure. It covers services, fee schedules, conflicts of interest, disciplinary history, and investment strategies and risks. Part 2B covers individual representatives.
You must deliver the brochure to clients before or at the start of the advisory relationship. State rules on delivery timing can vary slightly.
State Filings, Submission, and Timing
Depending on your state, expect to also prepare:
- Form U4 for each IAR
- Proof of qualifying exams
- Financial statements or minimum net capital documentation
- Branch office filings
- Sample advisory contracts
Everything runs through IARD, with fees varying by regulator.
On the SEC side, keep these clocks in mind:
- The statute gives the Commission 45 days to grant registration or start a denial proceeding
- If proceedings begin, they generally must wrap up within 120 days (a denial-review clock, not a routine approval timeline)
- A separate rule gives certain newly formed advisers 120 days after registration to demonstrate SEC eligibility
States don't follow a uniform approval period, so build in buffer time.
Where Back-Office Support Fits
None of this replaces securities-law counsel. Form ADV drafting and exemption analysis need review from a qualified US securities attorney.
Foreign founders launching an advisory business often also need help with entity formation records, bookkeeping, and tax coordination alongside the legal filings. VJM Global supports that work—entity setup and the accounting infrastructure regulators expect to see—while leaving securities-law judgment calls to licensed counsel.
What Ongoing Obligations Apply After Registration?
Registration only starts the clock. Once Form ADV is approved, registered advisers still carry continuing duties that do not fall away.
Fiduciary and Compliance Basics
Every registered adviser owes clients a fiduciary duty: accurate disclosures, active conflict-of-interest management, and honest marketing.
Beyond that baseline, you must also maintain:
- Written compliance policies, reviewed at least annually
- A designated chief compliance officer
- A code of ethics with personal-trading reporting
- Books and records retention
- Cybersecurity protocols
Annual and Interim Filings
File your annual Form ADV amendment within 90 days of fiscal year-end. Update the brochure immediately whenever information becomes materially inaccurate; don't wait for the annual cycle. States may layer on their own renewal deadlines, IAR continuing education, and mid-year update requirements when your original application details change.
Custody Rules Add Extra Weight
If you have custody of client funds or securities, or hold discretionary trading authority, obligations increase substantially. When custody applies, you generally must:
- Use a qualified custodian for client assets
- Ensure clients receive account statements at least quarterly
- Undergo an annual surprise examination, subject to specific exceptions
Rules also keep shifting. Recent Regulation S-P amendments require incident-response programs and client notification protocols, with compliance deadlines phased through 2025 and 2026 depending on entity size. Confirm current SEC guidance before assuming last year's checklist still applies.
Frequently Asked Questions
How much AUM do you need to register with the SEC?
There's no single number. $110 million RAUM generally triggers mandatory SEC registration, while $100 to $110 million allows a choice. Special categories and state rules can change this, so verify current SEC thresholds before filing.
What are the requirements to be a registered investment adviser?
You need to meet the adviser definition, identify your regulator, file Form ADV through IARD, deliver required disclosures, pay applicable fees, and maintain ongoing compliance. Representative qualifications and state-specific documents add further requirements.
Who is required to register as an investment adviser?
Anyone who, for compensation, advises others about securities as a business, unless an exclusion or exemption applies. The firm, its representatives, client types served, and states of operation all factor into the answer.
What is the SEC 120-day rule?
The SEC generally has 45 days to grant registration or start a denial proceeding; if proceedings begin, they must typically conclude within 120 days. A separate 120-day rule lets certain new advisers register before confirming SEC eligibility.
Who is exempt from registering as an investment adviser?
Qualifying private fund advisers, foreign private advisers, venture capital fund advisers, family offices, and certain SBIC advisers may avoid full registration. Most exemptions still carry conditions, reporting duties, or state-level filings.
Does an IAR ever register with the SEC?
No, the SEC doesn't register individual representatives. States handle IAR registration and qualification, even for representatives at SEC-registered firms, so state place-of-business rules still apply.
